Bonheur (OB:BONHR) Is Increasing Its Dividend To NOK6.75

The board of Bonheur ASA (OB:BONHR) has announced that the dividend on 3rd of June will be increased to NOK6.75, which will be 13% higher than last year's payment of NOK6.00 which covered the same period. Although the dividend is now higher, the yield is only 2.5%, which is below the industry average.

Check out our latest analysis for Bonheur

Bonheur's Payment Could Potentially Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Bonheur's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 24.9% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 35%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from NOK7.00 total annually to NOK6.00. This works out to be a decline of approximately 1.5% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Bonheur has impressed us by growing EPS at 65% per year over the past five years. 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.

We Really Like Bonheur's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. 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. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Bonheur that you should be aware of before investing. 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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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.