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Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Olav Thon Eiendomsselskap ASA (OB:OLT) has been paying a dividend to shareholders. Today it yields 1.5%. Does Olav Thon Eiendomsselskap tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

View our latest analysis for Olav Thon Eiendomsselskap

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How I analyze a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is it paying an annual yield above 75% of dividend payers?

• Has it consistently paid a stable dividend without missing a payment or drastically 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 it have the ability to keep paying its dividends going forward?

Does Olav Thon Eiendomsselskap pass our checks?

Olav Thon Eiendomsselskap has a trailing twelve-month payout ratio of 9.1%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect OLT’s payout to increase to 23% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.0%. However, EPS is forecasted to fall to NOK15.05 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Not only have dividend payouts from Olav Thon Eiendomsselskap fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.

In terms of its peers, Olav Thon Eiendomsselskap produces a yield of 1.5%, which is on the low-side for Real Estate stocks.

Next Steps:

Now you know to keep in mind the reason why investors should be careful investing in Olav Thon Eiendomsselskap for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering 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. I’ve put together three relevant factors you should further examine: