HAKI Safety (STO:HAKI B) Will Pay A Dividend Of SEK0.45

HAKI Safety AB (publ)'s (STO:HAKI B) investors are due to receive a payment of SEK0.45 per share on 4th of November. This will take the annual payment to 3.3% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for HAKI Safety

HAKI Safety's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before this announcement, HAKI Safety was paying out 75% of earnings, but a comparatively small 39% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, earnings per share is forecast to rise by 138.4% over the next year. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

HAKI Safety's Dividend Has Lacked Consistency

Looking back, HAKI Safety's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2018, the dividend has gone from SEK0.50 total annually to SEK0.90. This means that it has been growing its distributions at 10% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. HAKI Safety's EPS has fallen by approximately 10% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On HAKI Safety's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think HAKI Safety is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, HAKI Safety has 5 warning signs (and 1 which is significant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.