The board of SalMar ASA (OB:SALM) has announced that it will pay a dividend on the 1st of January, with investors receiving kr20.00 per share. This means that the annual payment will be 2.9% of the current stock price, which is in line with the average for the industry.
View our latest analysis for SalMar
SalMar's Dividend Is Well Covered By Earnings
Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend made up a very large portion of earnings and also represented 81% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.
Looking forward, earnings per share is forecast to rise by 34.7% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 74% which brings it into quite a comfortable range.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the first annual payment was kr4.00, compared to the most recent full-year payment of kr20.00. This means that it has been growing its distributions at 17% 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's Growth Prospects Are Limited
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Unfortunately, SalMar's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
SalMar's Dividend Doesn't Look Sustainable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for SalMar that you should be aware of before investing. 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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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.
About OB:SALM
SalMar
An aquaculture company, produces and sells farmed salmon in Asia, North America, Europe, and internationally.
High growth potential with solid track record.
