Itera (OB:ITERA) Will Pay A Dividend Of NOK0.40

Itera ASA (OB:ITERA) has announced that it will pay a dividend of NOK0.40 per share on the 7th of June. This takes the annual payment to 3.3% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Itera

Itera's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Itera's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 74.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 68% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was NOK0.06, compared to the most recent full-year payment of NOK0.40. This means that it has been growing its distributions at 21% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Itera has impressed us by growing EPS at 12% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Itera Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Itera that investors should know about before committing capital to this stock. Is Itera 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.