Nedbank Group (JSE:NED) Will Pay 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 8.9%, 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. Past distributions do not necessarily guarantee future ones, but Nedbank Group's payout ratio of 61% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 25.7% over the next 3 years. Analysts forecast the future payout ratio could be 59% over the same time horizon, which is a number we think the company can maintain.

See our latest analysis for Nedbank Group

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was ZAR10.28, compared to the most recent full-year payment of ZAR20.75. This means that it has been growing its distributions at 7.3% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

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. We are encouraged to see that Nedbank Group has grown earnings per share at 21% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

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. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Nedbank Group that investors should know about before committing capital to this stock. 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.