Coloplast (CPH:COLO B) Is Due To Pay A Dividend Of kr.5.00

The board of Coloplast A/S (CPH:COLO B) has announced that it will pay a dividend on the 11th of May, with investors receiving kr.5.00 per share. Based on this payment, the dividend yield on the company's stock will be 2.1%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Coloplast

Coloplast's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. At the time of the last dividend payment, Coloplast was paying out a very large proportion of what it was earning and 108% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Over the next year, EPS is forecast to expand by 6.5%. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 92%, which is on the higher side, but certainly still feasible.

Coloplast Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the first annual payment was kr.2.80, compared to the most recent full-year payment of kr.19.00. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Coloplast Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Coloplast has seen EPS rising for the last five years, at 7.6% per annum. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Coloplast that investors need to be conscious of moving forward. Is Coloplast not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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