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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Aurskog Sparebank (OB:AURG) has paid a dividend to shareholders. It currently yields 5.7%. Should it have a place in your portfolio? Let’s take a look at Aurskogrebank in more detail.

Check out our latest analysis for Aurskogrebank

How I analyze a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is it the top 25% annual dividend yield payer?

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

• Has the amount of dividend per share grown over the past?

• Can it afford to pay the current rate of dividends from its earnings?

• Will it have the ability to keep paying its dividends going forward?

How well does Aurskogrebank fit our criteria?

The company currently pays out 28% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 84% which, assuming the share price stays the same, leads to a dividend yield of 6.0%. However, EPS is forecasted to fall to NOK14.36 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Although AURG’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.

Relative to peers, Aurskogrebank has a yield of 5.7%, which is high for Banks stocks but still below the market’s top dividend payers.

Next Steps:

With this in mind, I definitely rank Aurskogrebank as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three fundamental factors you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for AURG’s future growth? Take a look at our free research report of analyst consensus for AURG’s outlook.

2. Valuation: What is AURG worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether AURG is currently mispriced by the market.

3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

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.

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. Thank you for reading.