Beijer Alma (STO:BEIA B) Is Increasing Its Dividend To SEK3.75

Beijer Alma AB (publ) (STO:BEIA B) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of April to SEK3.75. Based on this payment, the dividend yield for the company will be 1.9%, which is fairly typical for the industry.

See our latest analysis for Beijer Alma

Beijer Alma's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, Beijer Alma's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 5.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was SEK3.50, compared to the most recent full-year payment of SEK3.75. Its dividends have grown at less than 1% per annum over this time frame. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Beijer Alma has grown earnings per share at 6.3% per year over the past five years. Beijer Alma definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Beijer Alma'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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Beijer Alma (of which 1 shouldn't be ignored!) you should know about. 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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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.