Webstep (OB:WSTEP) Is Paying Out A Larger Dividend Than Last Year

Webstep ASA (OB:WSTEP) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of January to NOK2.30. This will take the annual payment to 9.1% of the stock price, which is above what most companies in the industry pay.

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Webstep's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Over the next year, EPS is forecast to expand by 45.2%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 76% which is a bit high but can definitely be sustainable.

Check out our latest analysis for Webstep

Webstep's Dividend Has Lacked Consistency

Looking back, Webstep's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of NOK1.50 in 2018 to the most recent total annual payment of NOK2.30. This implies that the company grew its distributions at a yearly rate of about 6.3% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Webstep might have put its house in order since then, but we remain cautious.

Webstep May Have Challenges Growing The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Webstep has grown earnings per share at 5.9% per year over the past five years. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Webstep is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 identified 2 warning signs for Webstep (1 is a bit unpleasant!) 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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