The board of Smartoptics Group AS (OB:SMOP) has announced that it will pay a dividend of $0.50 per share on the 22nd of May. This payment means that the dividend yield will be 2.5%, which is around the industry average.
Check out our latest analysis for Smartoptics Group
Smartoptics Group Doesn't Earn Enough To Cover Its Payments
Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Smartoptics Group's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Earnings per share is forecast to rise by 85.4% over the next year. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.
Smartoptics Group Is Still Building Its Track Record
Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Smartoptics Group has been growing its earnings per share at 46% a year over the past three years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.
We Really Like Smartoptics Group's Dividend
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Smartoptics Group that you should be aware of before investing. Is Smartoptics Group 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.
About OB:SMOP
Smartoptics Group
Provides optical networking solutions and devices worldwide.
High growth potential with excellent balance sheet.
