ROCKWOOL International's (CPH:ROCK B) Shareholders Will Receive A Bigger Dividend Than Last Year

ROCKWOOL International A/S' (CPH:ROCK B) dividend will be increasing to kr.35.00 on 11th of April. This makes the dividend yield about the same as the industry average at 1.5%.

See our latest analysis for ROCKWOOL International

ROCKWOOL International Is Paying Out More Than It Is Earning

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. But before making this announcement, ROCKWOOL International's earnings quite easily covered the dividend. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Over the next year, EPS is forecast to expand by 16.0%. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from €1.29 in 2012 to the most recent annual payment of €4.70. This means that it has been growing its distributions at 14% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that ROCKWOOL International has grown earnings per share at 13% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for ROCKWOOL International's prospects of growing its dividend payments in the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for ROCKWOOL International that you should be aware of before investing. Is ROCKWOOL International not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.