Aker (OB:AKER) Has Announced That It Will Be Increasing Its Dividend To NOK15.00

Aker ASA (OB:AKER) has announced that it will be increasing its dividend from last year's comparable payment on the 4th of May to NOK15.00. This takes the dividend yield to 4.2%, which shareholders will be pleased with.

View our latest analysis for Aker

Aker's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Aker is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS could expand by 87.5% if recent trends continue. If the dividend continues on this path, the payout ratio could be 8.1% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was NOK12.00, compared to the most recent full-year payment of NOK29.50. This works out to be a compound annual growth rate (CAGR) of approximately 9.4% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

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. Aker has seen EPS rising for the last five years, at 87% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Aker's Dividend

Overall, we always like to see the dividend being raised, but we don't think Aker will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

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. To that end, Aker has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is Aker 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.