ABG Sundal Collier Holding ASA (OB:ASC) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 23rd of October will not receive this dividend, which will be paid on the 1st of November.
ABG Sundal Collier Holding's next dividend payment will be kr0.2 per share. Last year, in total, the company distributed kr0.3 to shareholders. Based on the last year's worth of payments, ABG Sundal Collier Holding stock has a trailing yield of around 9.7% on the current share price of NOK3.5. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. ABG Sundal Collier Holding paid out 111% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance.
When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that ABG Sundal Collier Holding's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. ABG Sundal Collier Holding's dividend payments per share have declined at 15% per year on average over the past ten years, which is uninspiring.
To Sum It Up
Should investors buy ABG Sundal Collier Holding for the upcoming dividend? While we're glad to see that its earnings aren't shrinking, we're not enamored of the fact that it's paying out 111% of last year's earnings. ABG Sundal Collier Holding doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
Want to learn more about ABG Sundal Collier Holding's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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