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 12th of May to NOK3.00. This makes the dividend yield 8.7%, which is above the industry average.

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

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. 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. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Over the next year, EPS is forecast to fall by 4.5%. If the dividend continues along recent trends, we estimate the payout ratio could reach 102%, which could put the dividend in jeopardy if the company's earnings don't improve.

View our latest analysis for Elmera Group

Elmera Group's Dividend Has Lacked Consistency

Looking back, Elmera Group'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. The annual payment during the last 6 years was NOK2.20 in 2019, and the most recent fiscal year payment was NOK3.00. This implies that the company grew its distributions at a yearly rate of about 5.3% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Elmera Group May Find It Hard To Grow The Dividend

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. Although it's important to note that Elmera Group's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Elmera Group's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Elmera Group's payments are rock solid. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Elmera Group is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Elmera Group has 4 warning signs (and 3 which don't sit too well with us) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.