B2Holding (OB:B2H) Is Paying Out Less In Dividends Than Last Year

B2Holding ASA's (OB:B2H) dividend is being reduced from last year's payment covering the same period to NOK0.20 on the 5th of June. This means the annual payment is 2.6% of the current stock price, which is above the average for the industry.

See our latest analysis for B2Holding

B2Holding's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, B2Holding's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 177.0%. If the dividend continues on this path, the payout ratio could be 9.0% by next year, which we think can be pretty sustainable going forward.

B2Holding's Dividend Has Lacked Consistency

B2Holding has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the dividend has gone from NOK0.15 total annually to NOK0.20. This works out to be a compound annual growth rate (CAGR) of approximately 4.9% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Is Doubtful

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's not great to see that B2Holding's earnings per share has fallen at approximately 8.4% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On B2Holding's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for B2Holding that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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