SKAKO's (CPH:SKAKO) Shareholders Will Receive A Smaller Dividend Than Last Year

SKAKO A/S' (CPH:SKAKO) dividend is being reduced from last year's payment covering the same period to DKK2.50 on the 29th of April. This means the annual payment is 3.6% of the current stock price, which is above the average for the industry.

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SKAKO's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, SKAKO was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, EPS could fall by 1.2% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 68%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Check out our latest analysis for SKAKO

SKAKO's Dividend Has Lacked Consistency

Looking back, SKAKO's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2020, the annual payment back then was DKK2.00, compared to the most recent full-year payment of DKK2.50. This implies that the company grew its distributions at a yearly rate of about 4.6% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, SKAKO's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

SKAKO's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 4 warning signs for SKAKO (2 are potentially serious!) that you should be aware of before investing. Is SKAKO not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.