Bulten (STO:BULTEN) Will Pay A Dividend Of SEK2.50

Bulten AB (publ)'s (STO:BULTEN) investors are due to receive a payment of SEK2.50 per share on 3rd of May. The dividend yield will be 3.3% based on this payment which is still above the industry average.

Check out our latest analysis for Bulten

Bulten's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Bulten was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 189.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 17%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was SEK2.00, compared to the most recent full-year payment of SEK2.50. This means that it has been growing its distributions at 2.3% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Bulten's EPS has declined at around 7.3% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Bulten's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Bulten that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.