Gjensidige Forsikring (OB:GJF) Is Increasing Its Dividend To NOK10.00

Gjensidige Forsikring ASA (OB:GJF) will increase its dividend from last year's comparable payment on the 27th of March to NOK10.00. Based on this payment, the dividend yield for the company will be 3.9%, which is fairly typical for the industry.

View our latest analysis for Gjensidige Forsikring

Gjensidige Forsikring's Future Dividend Projections Appear Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. At the time of the last dividend payment, Gjensidige Forsikring was paying out a very large proportion of what it was earning and 119% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Looking forward, earnings per share is forecast to rise by 52.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 65%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Gjensidige Forsikring Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was NOK6.80 in 2015, and the most recent fiscal year payment was NOK9.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.8% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Gjensidige Forsikring May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. It's not great to see that Gjensidige Forsikring's earnings per share has fallen at approximately 4.6% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Gjensidige Forsikring will make a great income stock. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Gjensidige Forsikring that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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