Nedbank Group (JSE:NED) Is Increasing Its Dividend To ZAR11.04

Nedbank Group Limited (JSE:NED) will increase its dividend from last year's comparable payment on the 14th of April to ZAR11.04. This will take the annual payment to 7.3% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Nedbank Group

Nedbank Group's Dividend Forecasted To Be Well Covered By Earnings

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

Nedbank Group has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Nedbank Group's payout ratio of 57% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 27.3% over the next 3 years. Analysts forecast the future payout ratio could be 58% over the same time horizon, which is a number we think the company can maintain.

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 works out to be a compound annual growth rate (CAGR) of approximately 7.3% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Nedbank Group might have put its house in order since then, but we remain cautious.

We Could See Nedbank Group's Dividend Growing

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 7.6% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Nedbank Group that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.