engcon (STO:ENGCON B) Will Pay A Larger Dividend Than Last Year At SEK0.50

engcon AB (publ) (STO:ENGCON B) will increase its dividend from last year's comparable payment on the 22nd of May to SEK0.50. This takes the annual payment to 1.1% of the current stock price, which unfortunately is below what the industry is paying.

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engcon's Projected Earnings Seem Likely To Cover Future Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, engcon'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.

Looking forward, earnings per share is forecast to rise by 147.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 22%, which is in the range that makes us comfortable with the sustainability of the dividend.

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engcon Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of SEK0.85 in 2023 to the most recent total annual payment of SEK1.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.5% a year over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider engcon to be a consistent dividend paying stock.

We Could See engcon's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that engcon has grown earnings per share at 8.8% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

engcon Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 3 analysts we track are forecasting for engcon for free with public analyst estimates for the company. 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.