Stock Analysis

Eimskipafélag Íslands hf (ICE:EIM) Is Increasing Its Dividend To €11.47

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The board of Eimskipafélag Íslands hf. (ICE:EIM) has announced that it will be paying its dividend of €11.47 on the 26th of April, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 3.8%, which is below the industry average.

Check out our latest analysis for Eimskipafélag Íslands hf

Eimskipafélag Íslands hf Doesn't Earn Enough To Cover Its Payments

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Eimskipafélag Íslands hf's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 40.9% if the company continues along the path it has been on recently. If the dividend continues on its recent course, the payout ratio in 12 months could be 4,858%, which is a bit high and could start applying pressure to the balance sheet.

ICSE:EIM Historic Dividend March 18th 2023

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was €0.0131, compared to the most recent full-year payment of €0.138. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Eimskipafélag Íslands hf has been growing its earnings per share at 41% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Eimskipafélag Íslands hf Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Eimskipafélag Íslands hf is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 picked out 1 warning sign for Eimskipafélag Íslands hf that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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