Beijer Ref's (STO:BEIJ B) Shareholders Will Receive A Bigger Dividend Than Last Year

Beijer Ref AB (publ) (STO:BEIJ B) will increase its dividend from last year's comparable payment on the 30th of April to SEK0.65. This takes the annual payment to 0.9% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Beijer Ref

Beijer Ref's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, Beijer Ref's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 16.9%. If the dividend continues on this path, the payout ratio could be 22% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was SEK0.528, compared to the most recent full-year payment of SEK1.30. This works out to be a compound annual growth rate (CAGR) of approximately 9.4% a year over that time. 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.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Beijer Ref has been growing its earnings per share at 18% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Beijer Ref's prospects of growing its dividend payments in the future.

We should note that Beijer Ref has issued stock equal to 33% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Beijer Ref Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Beijer Ref is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Beijer Ref that investors should take into consideration. 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.