Indutrade's (STO:INDT) Dividend Will Be Increased To SEK2.85

Indutrade AB (publ)'s (STO:INDT) dividend will be increasing from last year's payment of the same period to SEK2.85 on 16th of April. Although the dividend is now higher, the yield is only 1.0%, which is below the industry average.

Check out our latest analysis for Indutrade

Indutrade's Payment Has 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. Before making this announcement, Indutrade was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 20.9%. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of SEK0.783 in 2014 to the most recent total annual payment of SEK2.85. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Indutrade 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 Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Indutrade has impressed us by growing EPS at 16% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Indutrade's prospects of growing its dividend payments in the future.

We Really Like Indutrade's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Indutrade that you should be aware of before investing. 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.