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

The board of Bouvet ASA (OB:BOUV) has announced that it will be paying its dividend of NOK2.60 on the 7th of June, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 4.2%.

Check out our latest analysis for Bouvet

Bouvet Is Paying Out More Than It Is Earning

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Bouvet's dividend made up quite a large proportion of earnings but only 59% 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.

Over the next year, EPS is forecast to expand by 15.0%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 102% over the next year.

Bouvet Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was NOK0.50, compared to the most recent full-year payment of NOK2.60. This means that it has been growing its distributions at 18% per annum 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's Dividend Might Lack Growth

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Bouvet has impressed us by growing EPS at 16% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payments look pretty sustainable with good earnings coverage and a reasonable track record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Bouvet that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.