Austevoll Seafood's (OB:AUSS) Shareholders Will Receive A Bigger Dividend Than Last Year

Austevoll Seafood ASA (OB:AUSS) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of January to NOK5.50. This will take the annual payment to 6.0% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Austevoll Seafood

Austevoll Seafood's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Austevoll Seafood was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The business is earning enough to make the dividend feasible, but the cash payout ratio of 82% indicates it is more focused on returning cash to shareholders than growing the business.

Over the next year, EPS is forecast to expand by 6.5%. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of NOK1.00 in 2013 to the most recent total annual payment of NOK5.50. This means that it has been growing its distributions at 19% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Austevoll Seafood has been growing its earnings per share at 19% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Austevoll Seafood's payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Austevoll Seafood has been making. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Austevoll Seafood that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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