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National Australia Bank Limited's (ASX:NAB) investors are due to receive a payment of A$0.85 per share on 2nd of July. This makes the dividend yield about the same as the industry average at 4.7%.
Our free stock report includes 1 warning sign investors should be aware of before investing in National Australia Bank. Read for free now.
National Australia Bank's Dividend Forecasted To Be Well Covered By Earnings
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.
National Australia Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on National Australia Bank's last earnings report, the payout ratio is at a decent 75%, meaning that the company is able to pay out its dividend with a bit of room to spare.
The next 3 years are set to see EPS grow by 3.0%. For the same time horizon, analysts estimate that the future payout ratio could be 73% which would be quite comfortable going to take the dividend forward.
View our latest analysis for National Australia Bank
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of A$1.98 in 2015 to the most recent total annual payment of A$1.70. Doing the maths, this is a decline of about 1.5% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
National Australia Bank Could Grow Its 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. National Australia Bank has impressed us by growing EPS at 7.9% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.
Our Thoughts On National Australia Bank's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for National Australia Bank that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.