(Adds share reaction, analyst comments)
HELSINKI, Feb 7 (Reuters) - Nordic financial holding company Sampo proposed a larger-than-expected annual dividend after reporting strong profits at its insurance businesses on Wednesday.
Known as a “dividend stock”, Sampo’s holdings include the largest Nordic property and casualty insurer If, 21 percent of the region’s largest bank Nordea and close to half of Danish insurer Topdanmark.
Sampo proposed an annual dividend of 2.60 euros ($3.22) per share, up from 2.30 euros a year ago and surpassing a market consensus of 2.48 euros in a Reuters poll.
That would give the stock a dividend yield of 5.6 percent with a share price that was up 2.5 percent on the news.
“The yield is huge. But it also raises the question, why pay out so much now,” said Antti Saari, analyst at OP Equities, with a “hold” rating on the stock.
Sampo has increased the payout every year since 2008, and has indicated that it aims to keep the dividends growing.
“Sampo has good buffers, so a bad year or two won’t risk dividends from growing. But in a longer run, they will need profit growth to support it,” Saari said.
Quarterly pretax profit fell 17 percent from a year ago to 436 million euros, in line with expectations, due to a smaller profit contribution from Nordea. However, If showed growing profits, despite lower investment returns.
“Rising interest rates would surely help them - they would get better returns for their fixed income assets while Nordea would also benefit via better net interest income,” Saari said.
He added that Sampo would likely seek to take over Topdanmark at some point, but only at the right price. ($1 = 0.8072 euros) (Reporting by Jussi Rosendahl and Tuomas Forsell, editing by Terje Solsvik)