Lindab International (STO:LIAB) Has Announced That It Will Be Increasing Its Dividend To SEK2.60

Lindab International AB (publ) (STO:LIAB) will increase its dividend from last year's comparable payment on the 19th of May to SEK2.60. This will take the dividend yield to an attractive 3.5%, providing a nice boost to shareholder returns.

Check out our latest analysis for Lindab International

Lindab International'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. Based on the last dividend, Lindab International is earning enough to cover the payment, but then it makes up 120% 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.

Looking forward, earnings per share is forecast to rise by 13.0% over the next year. If the dividend continues on this path, the payout ratio could be 39% by next year, which we think can be pretty sustainable going forward.

Lindab International Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 8 years was SEK1.10 in 2015, and the most recent fiscal year payment was SEK5.20. This means that it has been growing its distributions at 21% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Lindab International has been growing its earnings per share at 23% a year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Lindab International could prove to be a strong dividend payer.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Lindab International will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 1 warning sign for Lindab International that investors need to be conscious of moving forward. Is Lindab International not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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