Investment AB Latour's (STO:LATO B) Dividend Will Be Increased To SEK3.70

Investment AB Latour (publ) (STO:LATO B) will increase its dividend from last year's comparable payment on the 17th of May to SEK3.70. This takes the dividend yield to 1.8%, which shareholders will be pleased with.

View our latest analysis for Investment AB Latour

Investment AB Latour's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last payment was quite easily covered by earnings, but it made up 205% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share could rise by 8.3% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 58% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of SEK1.25 in 2013 to the most recent total annual payment of SEK3.70. This means that it has been growing its distributions at 11% 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 Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Investment AB Latour has grown earnings per share at 8.3% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Investment AB Latour that investors should know about before committing capital to this stock. 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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