Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Wallenius Wilhelmsen ASA (OB:WALWIL) is about to trade ex-dividend in the next 2 days. You will need to purchase shares before the 12th of November to receive the dividend, which will be paid on the 1st of January.
Wallenius Wilhelmsen's next dividend payment will be kr0.06 per share. Last year, in total, the company distributed kr0.06 to shareholders. Based on the last year's worth of payments, Wallenius Wilhelmsen has a trailing yield of 2.4% on the current stock price of NOK23.1. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Wallenius Wilhelmsen has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Wallenius Wilhelmsen paid out a comfortable 31% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 5.2% of its cash flow last year.
It's positive to see that Wallenius Wilhelmsen's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Wallenius Wilhelmsen's earnings per share have plummeted approximately 31% a year over the previous five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Wallenius Wilhelmsen has seen its dividend decline 11% per annum on average over the past nine years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
To Sum It Up
Should investors buy Wallenius Wilhelmsen for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
Ever wonder what the future holds for Wallenius Wilhelmsen? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.