Read This Before Considering Norconsult ASA (OB:NORCO) For Its Upcoming kr01.70 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Norconsult ASA (OB:NORCO) is about to go ex-dividend in just three days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Norconsult's shares before the 6th of May in order to receive the dividend, which the company will pay on the 14th of May.

The company's upcoming dividend is kr01.70 a share, following on from the last 12 months, when the company distributed a total of kr1.70 per share to shareholders. Last year's total dividend payments show that Norconsult has a trailing yield of 3.6% on the current share price of kr047.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Last year, Norconsult paid out 99% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 25% of its free cash flow last year.

It's good to see that while Norconsult's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

See our latest analysis for Norconsult

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Norconsult's earnings per share have risen 13% per annum over the last three years.

Given that Norconsult has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Is Norconsult an attractive dividend stock, or better left on the shelf? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with Norconsult's paying out such a high percentage of its profit. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

In light of that, while Norconsult has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for Norconsult that we recommend you consider before investing in the business.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.