Should You Buy Selvaag Bolig ASA (OB:SBO) For Its Dividend?
Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Selvaag Bolig ASA (OB:SBO) has paid dividends to shareholders, and these days it yields 9.6%. Does Selvaag Bolig tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
View our latest analysis for Selvaag Bolig
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5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is its annual yield among the top 25% of dividend-paying companies?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has dividend per share risen in the past couple of years?
Is is able to pay the current rate of dividends from its earnings?
Will the company be able to keep paying dividend based on the future earnings growth?
How well does Selvaag Bolig fit our criteria?
The company currently pays out 95% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is not well-covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 68%, which, assuming the share price stays the same, leads to a dividend yield of 8.0%. In addition to this, EPS should increase to NOK5.03, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Selvaag Bolig as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Selvaag Bolig produces a yield of 9.6%, which is high for Real Estate stocks.
Next Steps:
Whilst there are few things you may like about Selvaag Bolig from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three important factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for SBO’s future growth? Take a look at our free research report of analyst consensus for SBO’s outlook.
Valuation: What is SBO worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether SBO is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
