Investment AB Latour (STO:LATO B) Will Pay A Larger Dividend Than Last Year At kr3.30

The board of Investment AB Latour (publ) (STO:LATO B) has announced that it will be increasing its dividend on the 17th of May to kr3.30. Based on the announced payment, the dividend yield for the company will be 1.4%, which is fairly typical for the industry.

View our latest analysis for Investment AB Latour

Investment AB Latour's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last dividend, Investment AB Latour is earning enough to cover the payment, but the it makes up 177% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS could expand by 10.3% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 48%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from kr1.13 in 2012 to the most recent annual payment of kr3.30. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Investment AB Latour 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Investment AB Latour has seen EPS rising for the last five years, at 10% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Investment AB Latour's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Investment AB Latour's payments are rock solid. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

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. Taking the debate a bit further, we've identified 3 warning signs for Investment AB Latour that investors need to be conscious of moving forward. Is Investment AB Latour 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.