Absolent Air Care Group's (STO:ABSO) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Absolent Air Care Group AB (publ) (STO:ABSO) has announced that it will be paying its dividend of SEK3.25 on the 22nd of May, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 1.3%, which is fairly typical for the industry.

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Absolent Air Care Group's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Absolent Air Care Group was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 95.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 15% by next year, which is in a pretty sustainable range.

View our latest analysis for Absolent Air Care Group

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was SEK0.60, compared to the most recent full-year payment of SEK3.25. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Absolent Air Care Group has been growing its earnings per share at 14% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Absolent Air Care Group's prospects of growing its dividend payments in the future.

Absolent Air Care Group Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Are management backing themselves to deliver performance? Check their shareholdings in Absolent Air Care Group in our latest insider ownership analysis. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.