Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Jaeren Sparebank (OB:JAEREN) is about to go ex-dividend in just 3 days. This means that investors who purchase shares on or after the 27th of March will not receive the dividend, which will be paid on the 7th of April.
Jaeren Sparebank’s next dividend payment will be kr10.00 per share. Last year, in total, the company distributed kr10.00 to shareholders. Last year’s total dividend payments show that Jaeren Sparebank has a trailing yield of 7.1% on the current share price of NOK141. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it’s growing.
See our latest analysis for Jaeren Sparebank
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Jaeren Sparebank paid out 61% of its earnings to investors last year, a normal payout level for most businesses.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
Click here to see how much of its profit Jaeren Sparebank paid out over the last 12 months.
OB:JAEREN Historical Dividend Yield, March 22nd 2020
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we’re concerned to see Jaeren Sparebank’s earnings per share have dropped 22% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. In the past five years, Jaeren Sparebank has increased its dividend at approximately 15% a year on average. That’s interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company’s profits. This can be valuable for shareholders, but it can’t go on forever.
The Bottom Line
Is Jaeren Sparebank worth buying for its dividend? We’re not overly enthused to see Jaeren Sparebank’s earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. All things considered, we’re not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
With that being said, if you’re still considering Jaeren Sparebank as an investment, you’ll find it beneficial to know what risks this stock is facing. For example – Jaeren Sparebank has 2 warning signs we think you should be aware of.
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.