Mowi ASA's (OB:MOWI) dividend will be increasing to kr1.95 on 31st of May. This takes the annual payment to 2.8% of the current stock price, which is about average for the industry.
Mowi Doesn't Earn Enough To Cover Its Payments
Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Mowi's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS is forecast to expand by 69.2%. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.
Mowi's Dividend Has Lacked Consistency
Looking back, Mowi's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The first annual payment during the last 9 years was €0.49 in 2013, and the most recent fiscal year payment was €0.51. Dividend payments have been growing, but very slowly over the period. 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 May Be Hard To Come By
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that Mowi's earnings per share has fallen at approximately 8.8% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. 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 Mowi's Dividend
Overall, we always like to see the dividend being raised, but we don't think Mowi will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Mowi is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Mowi that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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.