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Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Gjensidige Forsikring ASA (OB:GJF) has paid a dividend to shareholders. It currently yields 4.7%. Let’s dig deeper into whether Gjensidige Forsikring should have a place in your portfolio.
Here’s how I find good dividend stocks
If you are a dividend investor, you should always assess these five key metrics:
- Is it the top 25% annual dividend yield payer?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has it increased its dividend per share amount over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
Does Gjensidige Forsikring pass our checks?
Gjensidige Forsikring has a trailing twelve-month payout ratio of 105%, which means that the dividend is not well-covered by its earnings. Going forward, analysts expect GJF’s payout to remain around the same level at 100% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 5.3%. In addition to this, EPS should increase to NOK11.04.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider Gjensidige Forsikring as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Gjensidige Forsikring produces a yield of 4.7%, which is high for Insurance stocks but still below the market’s top dividend payers.
Now you know to keep in mind the reason why investors should be careful investing in Gjensidige Forsikring for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three essential factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for GJF’s future growth? Take a look at our free research report of analyst consensus for GJF’s outlook.
- Valuation: What is GJF worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether GJF is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.