Borregaard's (OB:BRG) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Borregaard ASA (OB:BRG) has announced that it will be increasing its dividend on the 21st of April to kr5.00. This takes the dividend yield from 1.4% to 2.6%, which shareholders will be pleased with.

Check out our latest analysis for Borregaard

Borregaard's Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, Borregaard's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 23.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 64%, which is in the range that makes us comfortable with the sustainability of the dividend.

Borregaard Is Still Building Its Track Record

Borregaard's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The first annual payment during the last 9 years was kr1.00 in 2013, and the most recent fiscal year payment was kr2.75. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown at around 4.6% a year for the past five years, which isn't massive but still better than seeing them shrink. If Borregaard is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 3 analysts we track are forecasting for Borregaard for free with public analyst estimates for the company. Is Borregaard not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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