Nordea Bank Abp (STO:NDA SE) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Nordea Bank Abp's shares on or after the 25th of March will not receive the dividend, which will be paid on the 4th of April.
The company's next dividend payment will be €0.69 per share. Last year, in total, the company distributed €0.69 to shareholders. Based on the last year's worth of payments, Nordea Bank Abp stock has a trailing yield of around 6.8% on the current share price of SEK106.04. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Nordea Bank Abp is paying out an acceptable 73% of its profit, a common payout level among most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that Nordea Bank Abp's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Nordea Bank Abp has increased its dividend at approximately 10% a year on average.
Has Nordea Bank Abp got what it takes to maintain its dividend payments? Nordea Bank Abp's earnings are effectively flat over recent years, even as the company pays out more than half of its earnings to shareholders as dividends. We think there are likely better opportunities out there.
With that being said, if dividends aren't your biggest concern with Nordea Bank Abp, you should know about the other risks facing this business. For example, we've found 1 warning sign for Nordea Bank Abp that we recommend you consider before investing in the business.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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.