Investment AB Latour's (STO:LATO B) Upcoming Dividend Will Be Larger Than Last Year's

Investment AB Latour (publ)'s (STO:LATO B) dividend will be increasing to kr3.30 on 17th of May. This takes the annual payment to 1.1% of the current stock price, which is about average for the industry.

View our latest analysis for Investment AB Latour

Investment AB Latour's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last dividend, Investment AB Latour is earning enough to cover the payment, but the it makes up 142% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

If the trend of the last few years continues, EPS will grow by 4.6% over the next 12 months. If the dividend continues on this path, the payout ratio could be 50% by next year, which we think can be pretty sustainable going forward.

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. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Investment AB Latour has only grown its earnings per share at 4.6% per annum over the past five years. Investment AB Latour is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Investment AB Latour's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Investment AB Latour is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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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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.