Bouvet's (OB:BOUV) Shareholders Will Receive A Bigger Dividend Than Last Year

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. Based on this payment, the dividend yield for the company will be 4.2%, which is fairly typical for the industry.

See our latest analysis for Bouvet

Bouvet Is Paying Out More Than It Is Earning

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last payment made up 83% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Earnings per share is forecast to rise by 14.9% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 103%, which is a bit high and could start applying pressure to the balance sheet.

Bouvet Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of NOK0.50 in 2014 to the most recent total annual payment of NOK2.60. This implies that the company grew its distributions at a yearly rate of about 18% 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 Might Find It Hard To Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. Bouvet has seen EPS rising for the last five years, at 16% per annum. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Our Thoughts On Bouvet's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend is easily covered by cash flows and has a good track record, but we think the payout ratio might be a bit high. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Bouvet stock. 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.