Stock Analysis

Aker Solutions (OB:AKSO) Will Pay A Larger Dividend Than Last Year At NOK1.00

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Aker Solutions ASA (OB:AKSO) has announced that it will be increasing its dividend from last year's comparable payment on the 24th of April to NOK1.00. This takes the dividend yield to 2.8%, which shareholders will be pleased with.

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Aker Solutions' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Aker Solutions was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 72.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

OB:AKSO Historic Dividend March 25th 2023

Aker Solutions' Dividend Has Lacked Consistency

Aker Solutions 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 2015, the dividend has gone from NOK1.45 total annually to NOK1.00. Doing the maths, this is a decline of about 4.5% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Aker Solutions has seen EPS rising for the last five years, at 24% per annum. Aker Solutions is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Aker Solutions Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 10 analysts we track are forecasting for Aker Solutions for free with public analyst estimates for the company. Is Aker Solutions not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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