ASSA ABLOY (STO:ASSA B) Is Increasing Its Dividend To SEK2.40

ASSA ABLOY AB (publ) (STO:ASSA B) will increase its dividend from last year's comparable payment on the 16th of November to SEK2.40. This will take the dividend yield to an attractive 1.9%, providing a nice boost to shareholder returns.

View our latest analysis for ASSA ABLOY

ASSA ABLOY'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. Before making this announcement, ASSA ABLOY was easily earning enough to 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 32.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.

ASSA ABLOY Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of SEK1.50 in 2013 to the most recent total annual payment of SEK4.80. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. ASSA ABLOY has impressed us by growing EPS at 33% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like ASSA ABLOY's Dividend

Overall, a dividend increase is always good, and we think that ASSA ABLOY is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for ASSA ABLOY that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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