Sjóvá-Almennar tryggingar hf (ICE:SJOVA) Will Pay A Larger Dividend Than Last Year At ISK2.94

Sjóvá-Almennar tryggingar hf.'s (ICE:SJOVA) dividend will be increasing from last year's payment of the same period to ISK2.94 on 27th of March. This will take the annual payment to 6.0% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Sjóvá-Almennar tryggingar hf

Sjóvá-Almennar tryggingar hf's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Sjóvá-Almennar tryggingar hf was paying out quite a large proportion of both earnings and cash flow, with the dividend being 663% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

EPS is set to grow by 5.4% over the next year if recent trends continue. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 81%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

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 an annual total of ISK2.51 in 2015 to the most recent total annual payment of ISK2.94. This works out to be a compound annual growth rate (CAGR) of approximately 1.6% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

We Could See Sjóvá-Almennar tryggingar hf's Dividend Growing

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. We are encouraged to see that Sjóvá-Almennar tryggingar hf has grown earnings per share at 5.4% 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.

Sjóvá-Almennar tryggingar hf's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Sjóvá-Almennar tryggingar hf will make a great income stock. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

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. For example, we've identified 2 warning signs for Sjóvá-Almennar tryggingar hf (1 doesn't sit too well with us!) that you should be aware of before investing. 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.