A.P. Møller - Mærsk (CPH:MAERSK B) Will Pay A Larger Dividend Than Last Year At $1120.00

A.P. Møller - Mærsk A/S (CPH:MAERSK B) has announced that it will be increasing its dividend from last year's comparable payment on the 21st of March to $1120.00. Despite this raise, the dividend yield of 8.7% is only a modest boost to shareholder returns.

View our latest analysis for A.P. Møller - Mærsk

A.P. Møller - Mærsk's Projections Indicate Future Payments May Be Unsustainable

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, A.P. Møller - Mærsk was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to fall by 80.3%. Assuming the dividend continues along recent trends, we believe the payout ratio could reach over 200%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was $42.34, compared to the most recent full-year payment of $154.77. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. A.P. Møller - Mærsk has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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 A.P. Møller - Mærsk has grown earnings per share at 76% per year over the past five years. A.P. Møller - Mærsk is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

A.P. Møller - Mærsk Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. For example, we've identified 2 warning signs for A.P. Møller - Mærsk (1 doesn't sit too well with us!) that you should be aware of before investing. Is A.P. Møller - Mærsk not quite the opportunity you were looking for? Why not check out our selection of top 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.