Nordnet's (STO:SAVE) Dividend Will Be Increased To SEK7.20

Nordnet AB (publ)'s (STO:SAVE) dividend will be increasing from last year's payment of the same period to SEK7.20 on 7th of May. This will take the dividend yield to an attractive 3.7%, providing a nice boost to shareholder returns.

View our latest analysis for Nordnet

Nordnet's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Nordnet was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Looking forward, earnings per share is forecast to rise by 11.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 74%, which is in the range that makes us comfortable with the sustainability of the dividend.

Nordnet Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The dividend has gone from an annual total of SEK1.51 in 2021 to the most recent total annual payment of SEK7.20. This implies that the company grew its distributions at a yearly rate of about 68% over that duration. Nordnet has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Nordnet has impressed us by growing EPS at 19% per year over the past three years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Our Thoughts On Nordnet's Dividend

Overall, we always like to see the dividend being raised, but we don't think Nordnet will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Nordnet is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Nordnet has 3 warning signs (and 1 which can't be ignored) we think 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.