The board of Polaris Media ASA (OB:POL) has announced that the dividend on 16th of May will be reduced by 33% from last year's NOK1.50 to NOK1.00. This payment takes the dividend yield to 2.1%, which only provides a modest boost to overall returns.
Check out our latest analysis for Polaris Media
Polaris Media Is Paying Out More Than It Is Earning
Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
EPS is set to fall by 29.6% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 530%, which could put the dividend under pressure if earnings don't start to improve.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was NOK1.75 in 2014, and the most recent fiscal year payment was NOK1.50. Doing the maths, this is a decline of about 1.5% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Has Limited Growth Potential
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Polaris Media's EPS has declined at around 30% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.
We're Not Big Fans Of Polaris Media's Dividend
To sum up, we don't like when dividends are cut, but in this case the dividend may have been too high to begin with. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 4 warning signs for Polaris Media you should be aware of, and 1 of them is potentially serious. Is Polaris Media 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.
About OB:POL
Polaris Media
Operates as a media house and printing company in Norway and Sweden.
Solid track record with adequate balance sheet.
