Bouvet (OB:BOUV) Has Announced A Dividend Of NOK0.50

Bouvet ASA (OB:BOUV) has announced that it will pay a dividend of NOK0.50 per share on the 23rd of November. This payment means that the dividend yield will be 4.0%, which is around the industry average.

Check out our latest analysis for Bouvet

Bouvet's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last dividend made up a very large portion of earnings and also represented 78% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

EPS is set to grow by 25.4% over the next year if recent trends continue. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 92%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Bouvet Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of NOK0.50 in 2012 to the most recent total annual payment of NOK2.30. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Bouvet's Dividend Might Lack Growth

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Bouvet has grown earnings per share at 25% per year over the past five years. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.

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. Are management backing themselves to deliver performance? Check their shareholdings in Bouvet in our latest insider ownership analysis. Is Bouvet 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.