Alimak Group's (STO:ALIG) Upcoming Dividend Will Be Larger Than Last Year's

By
Simply Wall St
Published
April 12, 2022
OM:ALIG
Source: Shutterstock

Alimak Group AB (publ) (STO:ALIG) will increase its dividend on the 12th of May to kr3.30. This makes the dividend yield 3.3%, which is above the industry average.

See our latest analysis for Alimak Group

Alimak Group's Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Alimak Group was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 24.4%. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

historic-dividend
OM:ALIG Historic Dividend April 12th 2022

Alimak Group's Dividend Has Lacked Consistency

Alimak Group has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The first annual payment during the last 6 years was kr2.00 in 2016, and the most recent fiscal year payment was kr3.30. This implies that the company grew its distributions at a yearly rate of about 8.7% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

We Could See Alimak Group's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Alimak Group has impressed us by growing EPS at 5.0% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Our Thoughts On Alimak Group's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. As an example, we've identified 1 warning sign for Alimak Group that you should be aware of before investing. 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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