Coor Service Management Holding (STO:COOR) Is Due To Pay A Dividend Of SEK2.40

The board of Coor Service Management Holding AB (STO:COOR) has announced that it will pay a dividend on the 6th of May, with investors receiving SEK2.40 per share. This makes the dividend yield 6.0%, which will augment investor returns quite nicely.

Check out our latest analysis for Coor Service Management Holding

Coor Service Management Holding Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Coor Service Management Holding's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Over the next year, EPS is forecast to grow rapidly. Assuming the dividend continues along recent trends, we could see the payout ratio reach 104%, which is on the unsustainable side.

Coor Service Management Holding's Dividend Has Lacked Consistency

Looking back, Coor Service Management Holding's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 8 years was SEK1.40 in 2016, and the most recent fiscal year payment was SEK3.00. This implies that the company grew its distributions at a yearly rate of about 10.0% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Coor Service Management Holding might have put its house in order since then, but we remain cautious.

Coor Service Management Holding May Have Challenges Growing The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Coor Service Management Holding has been growing its earnings per share at 8.5% a year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

Our Thoughts On Coor Service Management Holding's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Coor Service Management Holding is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 4 warning signs for Coor Service Management Holding that investors should take into consideration. Is Coor Service Management Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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