Electrolux Professional's (STO:EPRO B) Shareholders Will Receive A Bigger Dividend Than Last Year

Electrolux Professional AB (publ) (STO:EPRO B) will increase its dividend from last year's comparable payment on the 3rd of May to SEK0.80. This takes the annual payment to 1.2% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Electrolux Professional

Electrolux Professional's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, Electrolux Professional's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 51.5%. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.

Electrolux Professional Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of SEK0.50 in 2022 to the most recent total annual payment of SEK0.80. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. Electrolux Professional 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.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Electrolux Professional has seen earnings per share falling at 4.0% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Electrolux Professional will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

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. Given that earnings are not growing, the dividend does not look nearly so attractive. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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