Reach Subsea (OB:REACH) Is Increasing Its Dividend To NOK0.42

Reach Subsea ASA (OB:REACH) will increase its dividend from last year's comparable payment on the 11th of June to NOK0.42. This takes the dividend yield to 6.1%, which shareholders will be pleased with.

View our latest analysis for Reach Subsea

Reach Subsea's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Reach Subsea was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 121.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.

Reach Subsea's Dividend Has Lacked Consistency

Looking back, Reach Subsea's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2019, the annual payment back then was NOK0.07, compared to the most recent full-year payment of NOK0.42. This means that it has been growing its distributions at 35% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Reach Subsea has grown earnings per share at 39% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Reach Subsea could prove to be a strong dividend payer.

We Really Like Reach Subsea's Dividend

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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Reach Subsea that investors should know about before committing capital to this stock. Is Reach Subsea 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.