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. This means the annual payment is 7.1% of the current stock price, which is above the average for the industry.

See our latest analysis for ABG Sundal Collier Holding

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

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, ABG Sundal Collier Holding's dividend made up quite a large proportion of earnings but only 45% of free cash flows. This leaves plenty of cash for reinvestment into the business.

EPS is set to grow by 3.4% over the next year if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 84%, which is on the higher side, but certainly still feasible.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The payments haven't really changed that much since 10 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.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been crawling upwards at 3.4% per year. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. 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.

Our Thoughts On ABG Sundal Collier Holding's Dividend

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. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, ABG Sundal Collier Holding has 2 warning signs (and 1 which is significant) we think you should know about. Is ABG Sundal Collier Holding 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.