Yahoo Finance ABN AMRO Bank (AMS:ABN) Has Announced That It Will Be Increasing Its Dividend To €0.67
ABN AMRO Bank N.V.'s (AMS:ABN) dividend will be increasing from last year's payment of the same period to €0.67 on 17th of May. Based on this payment, the dividend yield for the company will be 3.9%, which is fairly typical for the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that ABN AMRO Bank's stock price has increased by 45% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
See our latest analysis for ABN AMRO Bank
ABN AMRO Bank's Payment Expected To Have Solid Earnings Coverage
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.
Having paid out dividends for 7 years, ABN AMRO Bank has a good history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 40%shows that ABN AMRO Bank would be able to pay its last dividend without pressure on the balance sheet.
The next 3 years are set to see EPS grow by 4.0%. Analysts estimate the future payout ratio will be 50% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
ABN AMRO Bank's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2016, the annual payment back then was €0.88, compared to the most recent full-year payment of €0.64. Doing the maths, this is a decline of about 4.4% per year. A company that decreases its dividend over time generally isn't what we are looking for.
ABN AMRO Bank May Find It Hard To Grow The Dividend
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's not great to see that ABN AMRO Bank's earnings per share has fallen at approximately 3.9% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
Our Thoughts On ABN AMRO Bank's Dividend
Overall, we always like to see the dividend being raised, but we don't think ABN AMRO Bank will make a great income stock. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think ABN AMRO Bank is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for ABN AMRO Bank that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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
