B2Holding's (OB:B2H) Dividend Will Be Reduced To NOK0.20

B2Holding ASA (OB:B2H) is reducing its dividend from last year's comparable payment to NOK0.20 on the 5th of June. Despite the cut, the dividend yield of 2.7% will still be comparable to other companies in the industry.

See our latest analysis for B2Holding

B2Holding's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, B2Holding's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 116.0%. If the dividend continues on this path, the payout ratio could be 12% 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. The dividend has gone from an annual total of NOK0.15 in 2017 to the most recent total annual payment of 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 Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. B2Holding's earnings per share has shrunk at 10% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. 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 becomes a long term trend.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. 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.

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. 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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