Bulten's (STO:BULTEN) Shareholders Will Receive A Bigger Dividend Than Last Year

Bulten AB (publ) (STO:BULTEN) has announced that it will be increasing its dividend from last year's comparable payment on the 3rd of May to SEK2.50. This will take the annual payment to 2.9% of the stock price, which is above what most companies in the industry pay.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Bulten's stock price has increased by 38% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Bulten

Bulten Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Looking forward, EPS could fall by 19.9% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 108%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, 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. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Over the past five years, it looks as though Bulten's EPS has declined at around 20% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Bulten's Dividend Doesn't Look Great

In summary, investors will like to be receiving a higher dividend, but we have some questions about whether it can be sustained over the long term. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

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. Just as an example, we've come across 3 warning signs for Bulten you should be aware of, and 2 of them make us uncomfortable. 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.