CTT Systems (STO:CTT) Will Pay A Larger Dividend Than Last Year At SEK4.05

CTT Systems AB (publ) (STO:CTT) will increase its dividend from last year's comparable payment on the 11th of May to SEK4.05. This takes the dividend yield to 2.2%, which shareholders will be pleased with.

Check out our latest analysis for CTT Systems

CTT Systems' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend made up a very large portion of earnings and also represented 94% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.

Over the next year, EPS is forecast to expand by 118.3%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 35% which would be quite comfortable going to take the dividend forward.

CTT Systems' Dividend Has Lacked Consistency

Looking back, CTT Systems' dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2015, the dividend has gone from SEK0.40 total annually to SEK4.05. This means that it has been growing its distributions at 34% per annum over that time. CTT Systems has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Has Growth Potential

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. CTT Systems has seen EPS rising for the last five years, at 6.9% per annum. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Our Thoughts On CTT Systems' Dividend

Overall, we always like to see the dividend being raised, but we don't think CTT Systems will make a great income stock. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for CTT Systems that you should be aware of before investing. 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.