Bouvet (OB:BOUV) Is Increasing Its Dividend To NOK2.60

Bouvet ASA (OB:BOUV) has announced that it will be increasing its dividend from last year's comparable payment on the 7th of June to NOK2.60. The payment will take the dividend yield to 4.3%, which is in line with the average for the industry.

View our latest analysis for Bouvet

Bouvet Is Paying Out More Than It Is Earning

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before this announcement, Bouvet was paying out 83% of earnings, but a comparatively small 56% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Earnings per share is forecast to rise by 15.0% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 102%, which is a bit high and could start applying pressure to the balance sheet.

Bouvet Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from NOK0.50 total annually to NOK2.60. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Bouvet Might Find It Hard To Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Bouvet has seen EPS rising for the last five years, at 16% per annum. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. With a reasonable track record and good earnings coverage, the payments look sustainable. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. As an example, we've identified 1 warning sign for Bouvet that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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