Husqvarna's (STO:HUSQ B) Dividend Will Be SEK0.50

The board of Husqvarna AB (publ) (STO:HUSQ B) has announced that it will pay a dividend on the 5th of November, with investors receiving SEK0.50 per share. This means that the dividend yield is 1.9%, which is a bit low when comparing to other companies in the industry.

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Husqvarna's Payment Could Potentially Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Husqvarna was quite comfortably earning enough to cover the dividend. 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 182.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.

View our latest analysis for Husqvarna

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from SEK1.65 total annually to SEK1.00. Doing the maths, this is a decline of about 4.9% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Husqvarna's EPS has fallen by approximately 16% 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 Husqvarna's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 4 warning signs for Husqvarna that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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