DFDS' (CPH:DFDS) Shareholders Will Receive A Smaller Dividend Than Last Year

DFDS A/S (CPH:DFDS) has announced that on 20th of March, it will be paying a dividend ofDKK3.00, which a reduction from last year's comparable dividend. This means that the annual payment is 1.5% of the current stock price, which is lower than what the rest of the industry is paying.

See our latest analysis for DFDS

DFDS' Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, DFDS' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 64.7%. If the dividend continues on this path, the payout ratio could be 7.1% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of DKK2.80 in 2014 to the most recent total annual payment of DKK3.00. Dividend payments have been growing, but very slowly over the period. 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's Growth Prospects Are Limited

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. Unfortunately, DFDS' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think DFDS is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for DFDS that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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