RIAS' (CPH:RIAS B) Dividend Will Be Increased To kr.35.00

RIAS A/S (CPH:RIAS B) has announced that it will be increasing its dividend on the 21st of January to kr.35.00, which will be 40% higher than last year. This will take the dividend yield from 3.9% to 5.4%, providing a nice boost to shareholder returns.

View our latest analysis for RIAS

RIAS' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last dividend, RIAS is earning enough to cover the payment, but the it makes up 207% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share could rise by 15.1% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 59% by next year, which we think can be pretty sustainable going forward.

RIAS Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2011, the dividend has gone from kr.5.00 to kr.25.00. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that RIAS has grown earnings per share at 15% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for RIAS that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.