ABG Sundal Collier Holding (OB:ABG) Has Announced A Dividend Of NOK0.50

ABG Sundal Collier Holding ASA (OB:ABG) will pay a dividend of NOK0.50 on the 6th of May. Based on this payment, the dividend yield on the company's stock will be 7.4%, which is an attractive boost to shareholder returns.

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ABG Sundal Collier Holding's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before this announcement, ABG Sundal Collier Holding was paying out 83% of earnings, but a comparatively small 45% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Earnings per share could rise by 3.5% over the next year if things go the same way as they have for the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 82%, which is on the higher side, but certainly still feasible.

View our latest analysis for ABG Sundal Collier Holding

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The last annual payment of NOK0.50 was flat on the annual payment from10 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

ABG Sundal Collier Holding May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings have grown at around 3.5% a year for the past five years, which isn't massive but still better than seeing them shrink. Slow growth and a high payout ratio could mean that ABG Sundal Collier Holding has maxed out the amount that it has been able to pay to shareholders. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about ABG Sundal Collier Holding's payments, as there could be some issues with sustaining them into the future. 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 be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for ABG Sundal Collier Holding you should be aware of, and 1 of them makes us a bit uncomfortable. 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.