Nedbank Group (JSE:NED) Has Announced A Dividend Of ZAR10.28

Nedbank Group Limited (JSE:NED) has announced that it will pay a dividend of ZAR10.28 per share on the 8th of September. This makes the dividend yield 9.0%, which is above the industry average.

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Nedbank Group's Payment Expected To Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Nedbank Group has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Nedbank Group's last earnings report, the payout ratio is at a decent 61%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 22.7%. The future payout ratio could be 59% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

View our latest analysis for Nedbank Group

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ZAR10.28 in 2015, and the most recent fiscal year payment was ZAR20.75. This works out to be a compound annual growth rate (CAGR) of approximately 7.3% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Nedbank Group has seen EPS rising for the last five years, at 21% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Nedbank Group could prove to be a strong dividend payer.

Nedbank Group 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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Nedbank Group that you should be aware of before investing. 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.