Itera (OB:ITERA) Has Announced A Dividend Of NOK0.40

Itera ASA's (OB:ITERA) investors are due to receive a payment of NOK0.40 per share on 7th of June. The payment will take the dividend yield to 3.4%, which is in line with the average for the industry.

View our latest analysis for Itera

Itera's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. The last payment made up 70% of earnings, but cash flows were much higher. 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.

Looking forward, earnings per share is forecast to rise by 101.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 73%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was NOK0.35, compared to the most recent full-year payment of NOK0.40. This implies that the company grew its distributions at a yearly rate of about 1.3% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

We Could See Itera's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Itera has seen EPS rising for the last five years, at 5.8% per annum. 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.

Our Thoughts On Itera's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Itera that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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