Gjensidige Forsikring's (OB:GJF) Upcoming Dividend Will Be Larger Than Last Year's

Gjensidige Forsikring ASA's (OB:GJF) dividend will be increasing from last year's payment of the same period to NOK10.00 on 28th of March. This takes the annual payment to 3.9% of the current stock price, which is about average for the industry.

View our latest analysis for Gjensidige Forsikring

Gjensidige Forsikring's Projected Earnings Seem Likely To Cover Future Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Gjensidige Forsikring was paying out quite a large proportion of both earnings and cash flow, with the dividend being 119% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

The next year is set to see EPS grow by 50.6%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 66% which would be quite comfortable going to take the dividend forward.

Gjensidige Forsikring Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was NOK5.90, compared to the most recent full-year payment of NOK9.00. This implies that the company grew its distributions at a yearly rate of about 4.3% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. 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 earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Gjensidige Forsikring's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Gjensidige Forsikring's payments are rock solid. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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. Is Gjensidige Forsikring not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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