Elmera Group's (OB:ELMRA) Upcoming Dividend Will Be Larger Than Last Year's

Elmera Group ASA (OB:ELMRA) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of January to NOK3.00. This will take the dividend yield to an attractive 8.9%, providing a nice boost to shareholder returns.

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Estimates Indicate Elmera Group's Could Struggle to Maintain Dividend Payments In The Future

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Elmera Group was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. Generally, we think that this would be a risky long term practice.

Over the next year, EPS is forecast to fall by 4.5%. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 102%, which is definitely a bit high to be sustainable going forward.

View our latest analysis for Elmera Group

Elmera Group's Dividend Has Lacked Consistency

Elmera Group has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2019, the annual payment back then was NOK2.20, compared to the most recent full-year payment of NOK3.00. This means that it has been growing its distributions at 5.3% per annum 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.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Elmera Group hasn't seen much change in its earnings per share over the last five years.

Elmera Group's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments are bit high to be considered sustainable, and the track record isn't the best. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 4 warning signs for Elmera Group you should be aware of, and 3 of them are concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.