Bergman & Beving (STO:BERG B) Is Paying Out A Larger Dividend Than Last Year

Bergman & Beving AB (publ)'s (STO:BERG B) dividend will be increasing from last year's payment of the same period to SEK4.00 on 4th of September. This makes the dividend yield about the same as the industry average at 1.4%.

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Bergman & Beving's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Bergman & Beving's Could Struggle to Maintain Dividend Payments In The Future

Bergman & Beving's Future Dividends May Potentially Be At Risk

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Bergman & Beving is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

EPS is forecast to rise very quickly over the next 12 months. If recent patterns in the dividend continues, we would start to get a bit worried, with the payout ratio possibly reaching 120%.

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Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. There hasn't been much of a change in the dividend over the last 10 years. 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.

Dividend Growth May Be Hard To Come By

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. Over the past five years, it looks as though Bergman & Beving's EPS has declined at around 7.2% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Bergman & Beving's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Bergman & Beving's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Bergman & Beving has 2 warning signs (and 1 which is potentially serious) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.