Eolus Vind's (STO:EOLU B) Shareholders Will Receive A Smaller Dividend Than Last Year

Eolus Vind AB (publ) (STO:EOLU B) is reducing its dividend to kr1.50 on the 27th of May. This means that the annual payment is 1.3% of the current stock price, which is lower than what the rest of the industry is paying.

See our latest analysis for Eolus Vind

Eolus Vind Might Find It Hard To Continue The Dividend

Even a low dividend yield can be attractive if it is sustained for years on end. Despite not generating a profit, Eolus Vind is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

If the trend of the last few years continues, EPS will grow by 19.1% over the next 12 months. The company seems to be going down the right path, but it will probably take a little bit longer than a year to cross over into profitability. Unless this happens fairly soon, the dividend could start to come under pressure.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from kr1.00 in 2012 to the most recent annual payment of kr1.50. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Company Could Face Some Challenges Growing The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Eolus Vind has seen EPS rising for the last five years, at 19% per annum. It's not great that the company is not turning a profit, but the decent growth in recent years is certainly a positive sign. All is not lost, but the future of the dividend definitely rests upon the company's ability to become profitable soon.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. Strong earnings growth means Eolus Vind has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Eolus Vind that investors should take into consideration. 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.