Advertisement
New Zealand markets close in 4 hours 21 minutes
  • NZX 50

    12,227.77
    -101.67 (-0.82%)
     
  • NZD/USD

    0.6042
    -0.0009 (-0.14%)
     
  • NZD/EUR

    0.5542
    -0.0002 (-0.03%)
     
  • ALL ORDS

    8,175.50
    -97.20 (-1.18%)
     
  • ASX 200

    7,938.00
    -98.50 (-1.23%)
     
  • OIL

    82.11
    -0.71 (-0.86%)
     
  • GOLD

    2,433.80
    -22.60 (-0.92%)
     
  • NASDAQ

    19,705.09
    -94.01 (-0.47%)
     
  • FTSE

    8,204.89
    +17.43 (+0.21%)
     
  • Dow Jones

    40,665.02
    -533.08 (-1.29%)
     
  • DAX

    18,354.76
    -82.54 (-0.45%)
     
  • Hang Seng

    17,778.41
    +39.01 (+0.22%)
     
  • NIKKEI 225

    40,067.41
    -58.94 (-0.15%)
     
  • NZD/JPY

    95.0190
    -0.1230 (-0.13%)
     

NatWest Group (LON:NWG) Is Increasing Its Dividend To £0.10

NatWest Group plc (LON:NWG) will increase its dividend from last year's comparable payment on the 2nd of May to £0.10. This makes the dividend yield 4.8%, which is above the industry average.

Check out our latest analysis for NatWest Group

NatWest Group's Earnings Will Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

NatWest Group is just starting to establish itself as being able to pay dividends to shareholders, given its short 4-year history of distributing earnings. Taking data from NatWest Group's last earnings report, the payout ratio is at a decent 37%, meaning that the company is able to pay out its dividend with some room to spare.

ADVERTISEMENT

Looking forward, EPS is forecast to rise by 38.4% over the next 3 years. Analysts estimate the future payout ratio will be 37% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
historic-dividend

NatWest Group's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2019, the dividend has gone from £0.0431 total annually to £0.135. This implies that the company grew its distributions at a yearly rate of about 33% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. NatWest Group has seen EPS rising for the last five years, at 40% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think NatWest Group's payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments NatWest Group has been making. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 NatWest 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here