Eimskipafélag Íslands hf's (ICE:EIM) Upcoming Dividend Will Be Larger Than Last Year's

Eimskipafélag Íslands hf.'s (ICE:EIM) dividend will be increasing from last year's payment of the same period to €20.08 on 19th of April. Although the dividend is now higher, the yield is only 2.4%, which is below the industry average.

View our latest analysis for Eimskipafélag Íslands hf

Eimskipafélag Íslands hf Is Paying Out More Than It Is Earning

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Eimskipafélag Íslands hf was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to grow by 39.8% over the next year if recent trends continue. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 4,385% over the next year.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of €0.0131 in 2013 to the most recent total annual payment of €0.0905. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. 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

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. Eimskipafélag Íslands hf has impressed us by growing EPS at 40% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Eimskipafélag Íslands hf Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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. 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. 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. Is Eimskipafélag Íslands hf 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.