Webstep's (OB:WSTEP) Dividend Will Be Increased To NOK2.30

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 dividend yield to an attractive 9.4%, providing a nice boost to shareholder returns.

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Webstep's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Earnings per share is forecast to rise by 45.2% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 76% - on the higher side, but we wouldn't necessarily say this is unsustainable.

View our latest analysis for Webstep

Webstep's Dividend Has Lacked Consistency

Looking back, Webstep's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2018, the annual payment back then was NOK1.50, compared to the most recent full-year payment of NOK2.30. This works out to be a compound annual growth rate (CAGR) of approximately 6.3% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

There Isn't Much Room To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Webstep has impressed us by growing EPS at 5.9% per year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

Webstep's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Webstep's payments are rock solid. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.

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. Just as an example, we've come across 2 warning signs for Webstep you should be aware of, and 1 of them is concerning. Is Webstep 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.