Alm. Brand A/S (CPH:ALMB) has announced that it will pay a dividend of DKK0.30 per share on the 1st of May. Including this payment, the dividend yield on the stock will be 2.3%, which is a modest boost for shareholders' returns.
View our latest analysis for Alm. Brand
Alm. Brand Doesn't Earn Enough To Cover Its Payments
If it is predictable over a long period, even low dividend yields can be attractive. Alm. Brand is unprofitable despite paying a dividend, and it is paying out 312% of its free cash flow. This is quite a strong warning sign that the dividend may not be sustainable.
EPS is forecast to rise very quickly over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach 628%, which is unsustainable.
Alm. Brand's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of DKK0.50 in 2015 to the most recent total annual payment of DKK0.30. Doing the maths, this is a decline of about 6.2% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Has Limited Growth Potential
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Over the past five years, it looks as though Alm. Brand's EPS has declined at around 29% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
Alm. Brand's Dividend Doesn't Look Great
Overall, while some might be pleased that the dividend wasn't cut, we think this may help Alm. Brand make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. The dividend doesn't inspire confidence that it will provide solid income in the future.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Alm. Brand that you should be aware of before investing. Is Alm. Brand 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.
About CPSE:ALMB
Proven track record with moderate growth potential.
