AF Gruppen (OB:AFG) Has Re-Affirmed Its Dividend Of kr6.50

AF Gruppen ASA (OB:AFG) has announced that it will pay a dividend of kr6.50 per share on the 25th of May. This means the annual payment is 5.3% of the current stock price, which is above the average for the industry.

View our latest analysis for AF Gruppen

AF Gruppen Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, the dividend made up 79% of cash flows, but a higher proportion of net income. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

The next 12 months is set to see EPS grow by 4.1%. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 117% over the next year.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2012, the first annual payment was kr4.50, compared to the most recent full-year payment of kr10.50. This implies that the company grew its distributions at a yearly rate of about 8.8% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

AF Gruppen May Have Challenges Growing The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that AF Gruppen has grown earnings per share at 5.1% per year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about AF Gruppen's payments, as there could be some issues with sustaining them into the future. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think AF Gruppen is a great stock to add to your portfolio if income is your focus.

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. Taking the debate a bit further, we've identified 1 warning sign for AF Gruppen that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.

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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.