Epiroc (STO:EPI A) Will 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 means the annual payment will be 1.8% of the current stock price, which is lower than the industry average.

See our latest analysis for Epiroc

Epiroc's Payment Could Potentially Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Epiroc was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 37.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 43%, which is in the range that makes us comfortable with the sustainability of the dividend.

Epiroc Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2019, the annual payment back then was SEK2.10, compared to the most recent full-year payment of SEK3.80. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

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. We are encouraged to see that Epiroc has grown earnings per share at 8.1% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like Epiroc's Dividend

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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 20 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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