Alligo's (STO:ALLIGO B) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Alligo AB (publ) (STO:ALLIGO B) has announced that it will be paying its dividend of SEK3.50 on the 30th of May, an increased payment from last year's comparable dividend. This makes the dividend yield 2.4%, which is above the industry average.

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 Alligo's stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Alligo

Alligo's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Alligo's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 48.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 24%, which is in the range that makes us comfortable with the sustainability of the dividend.

Alligo's Dividend Has Lacked Consistency

Alligo has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the annual payment back then was SEK2.60, compared to the most recent full-year payment of SEK3.50. This implies that the company grew its distributions at a yearly rate of about 5.1% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Alligo Could Grow Its Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Alligo has impressed us by growing EPS at 5.1% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Alligo'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. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Alligo that you should be aware of before investing. 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.