National Australia Bank's (ASX:NAB) Shareholders Will Receive A Bigger Dividend Than Last Year
National Australia Bank Limited (ASX:NAB) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of December to A$0.84. This makes the dividend yield about the same as the industry average at 5.9%.
View our latest analysis for National Australia Bank
National Australia Bank's Dividend Forecasted To Be Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much.
National Australia Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on National Australia Bank's last earnings report, the payout ratio is at a decent 70%, 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 0.3%. The future payout ratio could be 73% over that time period, according to analyst estimates, which is a good look for the future of the dividend.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was A$1.86, compared to the most recent full-year payment of A$1.68. Doing the maths, this is a decline of about 1.0% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
National Australia Bank May Find It Hard To Grow The Dividend
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. However, National Australia Bank has only grown its earnings per share at 2.1% per annum over the past five years. National Australia Bank's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.
In Summary
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for National Australia Bank that investors should take into consideration. Is National Australia Bank not quite the opportunity you were looking for? Why not check out our selection of top 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.
