Veidekke (OB:VEI) Has Announced That It Will Be Increasing Its Dividend To NOK9.00

The board of Veidekke ASA (OB:VEI) has announced that it will be paying its dividend of NOK9.00 on the 21st of May, an increased payment from last year's comparable dividend. This will take the annual payment to 6.1% of the stock price, which is above what most companies in the industry pay.

Veidekke's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Veidekke's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Earnings per share is forecast to rise by 12.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 93%, which is on the higher side, but certainly still feasible.

See our latest analysis for Veidekke

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of NOK3.00 in 2015 to the most recent total annual payment of NOK9.00. This means that it has been growing its distributions at 12% per annum over that time. 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.

Veidekke Might Find It Hard To Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Veidekke has been growing its earnings per share at 26% a year over the past five years. EPS has been growing well, but Veidekke has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

Our Thoughts On Veidekke's Dividend

Overall, we always like to see the dividend being raised, but we don't think Veidekke will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

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. As an example, we've identified 1 warning sign for Veidekke that you should be aware of before investing. Is Veidekke 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.