Polaris Media's (OB:POL) Dividend Will Be Reduced To NOK1.50

Polaris Media ASA's (OB:POL) dividend is being reduced from last year's payment covering the same period to NOK1.50 on the 22nd of May. Despite the cut, the dividend yield of 3.1% will still be comparable to other companies in the industry.

Check out our latest analysis for Polaris Media

Polaris Media Doesn't Earn Enough To Cover Its Payments

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, the company was paying out 151% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 52%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, EPS could fall by 11.1% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 185%, which is definitely a bit high to be 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. Since 2013, the annual payment back then was NOK1.75, compared to the most recent full-year payment of NOK1.50. Doing the maths, this is a decline of about 1.5% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Over the past five years, it looks as though Polaris Media's EPS has declined at around 11% 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.

Polaris Media's Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Polaris Media is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Polaris Media that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.