Gjensidige Forsikring's (OB:GJF) Dividend Will Be Increased To kr7.70

Gjensidige Forsikring ASA's (OB:GJF) dividend will be increasing to kr7.70 on 6th of April. This will take the annual payment from 3.6% to 5.4% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Gjensidige Forsikring

Gjensidige Forsikring's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Gjensidige Forsikring's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to fall by 10.9% over the next year. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 95%, meaning that most of the company's earnings are being paid out to shareholders.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was kr4.55 in 2012, and the most recent fiscal year payment was kr7.70. This implies that the company grew its distributions at a yearly rate of about 5.4% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Gjensidige Forsikring Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Gjensidige Forsikring has impressed us by growing EPS at 8.9% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Gjensidige Forsikring Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Gjensidige Forsikring (of which 1 is significant!) you should know about. 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.