Bergman & Beving (STO:BERG B) Has Announced That It Will Be Increasing Its Dividend To SEK3.60

Bergman & Beving AB (publ)'s (STO:BERG B) dividend will be increasing from last year's payment of the same period to SEK3.60 on 31st of August. This will take the annual payment to 2.6% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Bergman & Beving

Bergman & Beving'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. Prior to this announcement, Bergman & Beving's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 5.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 45% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was SEK3.00, compared to the most recent full-year payment of SEK3.60. This works out to be a compound annual growth rate (CAGR) of approximately 1.8% a year over that time. 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's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Bergman & Beving has only grown its earnings per share at 4.7% per annum over the past five years. Bergman & Beving is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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 2 warning signs for Bergman & Beving that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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