Beijer Alma AB (publ) (STO:BEIA B) has announced that it will be increasing its dividend on the 6th of April to kr3.50. Even though the dividend went up, the yield is still quite low at only 1.5%.
Beijer Alma's Earnings Easily Cover the Distributions
If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Beijer Alma's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
The next year is set to see EPS grow by 14.2%. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.
The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was kr3.00 in 2012, and the most recent fiscal year payment was kr3.50. This means that it has been growing its distributions at 1.6% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Beijer Alma has seen EPS rising for the last five years, at 12% per annum. Beijer Alma definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Beijer Alma 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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
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. For example, we've picked out 2 warning signs for Beijer Alma that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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.