Nordnet (STO:SAVE) Is Increasing Its Dividend To kr5.56

Nordnet AB (publ)'s (STO:SAVE) dividend will be increasing to kr5.56 on 5th of May. This takes the dividend yield from 3.4% to 4.5%, which shareholders will be pleased with.

View our latest analysis for Nordnet

Nordnet Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before this announcement, Nordnet was paying out 71% of earnings, but a comparatively small 10% of free cash flows. This leaves plenty of cash for reinvestment into the business.

EPS is set to fall by 13.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach 150%, which could put the dividend in jeopardy if the company's earnings don't improve.

Nordnet Doesn't Have A Long Payment History

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Nordnet has grown earnings per share at 36% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Nordnet hasn't been doing.

Nordnet 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. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for Nordnet that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.