HAKI Safety (STO:HAKI B) Has Announced That It Will Be Increasing Its Dividend To SEK0.45

HAKI Safety AB (publ)'s (STO:HAKI B) dividend will be increasing from last year's payment of the same period to SEK0.45 on 29th of April. This makes the dividend yield 3.7%, which is above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that HAKI Safety's stock price has increased by 34% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for HAKI Safety

HAKI Safety's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, HAKI Safety was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 67.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which is in the range that makes us comfortable with the sustainability of the dividend.

HAKI Safety's Dividend Has Lacked Consistency

It's comforting to see that HAKI Safety has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 5 years was SEK0.50 in 2019, and the most recent fiscal year payment was SEK0.90. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. HAKI Safety has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, HAKI Safety has only grown its earnings per share at 3.4% per annum over the past five years. If HAKI Safety is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On HAKI Safety's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 3 warning signs for HAKI Safety that you should be aware of before investing. Is HAKI Safety not quite the opportunity you were looking for? Why not check out our selection of top 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.