ABN AMRO Bank N.V. (AMS:ABN) has announced that it will pay a dividend of €0.75 per share on the 23rd of May. However, the dividend yield of 8.1% is still a decent boost to shareholder returns.

View our latest analysis for ABN AMRO Bank

ABN AMRO Bank's Earnings Will Easily Cover The Distributions

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

Having paid out dividends for 9 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 73%shows that ABN AMRO Bank would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share is forecast to fall by 10.7% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 51% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.ENXTAM:ABN Historic Dividend February 15th 2025

ABN AMRO Bank's Dividend Has Lacked Consistency

ABN AMRO Bank has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 9 years was €0.88 in 2016, and the most recent fiscal year payment was €1.35. This means that it has been growing its distributions at 4.9% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Has Growth Potential

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. ABN AMRO Bank has impressed us by growing EPS at 7.5% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

In Summary

Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for ABN AMRO Bank you should be aware of, and 1 of them can't be ignored. 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.

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