Epiroc (STO:EPI A) Is Due To Pay A Dividend Of SEK1.90

The board of Epiroc AB (publ) (STO:EPI A) has announced that it will pay a dividend on the 15th of May, with investors receiving SEK1.90 per share. This payment means the dividend yield will be 2.0%, which is below the average for the industry.

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Epiroc's Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. The last dividend was quite easily covered by Epiroc's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 30.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

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Epiroc Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. Since 2019, the dividend has gone from SEK2.10 total annually to SEK3.80. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. Epiroc has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Epiroc Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Epiroc has impressed us by growing EPS at 8.1% 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.

Epiroc Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Epiroc might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend 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 19 analysts we track are forecasting for Epiroc for free with public analyst estimates for the company. Is Epiroc not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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