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

Lindab International AB (publ) (STO:LIAB) has announced that it will be increasing its dividend from last year's comparable payment on the 9th of November to SEK2.60. This makes the dividend yield 3.4%, which is above the industry average.

Check out our latest analysis for Lindab International

Lindab International's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Lindab International's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 20.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 43% by next year, which is in a pretty sustainable range.

Lindab International Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2015, the dividend has gone from SEK1.10 total annually to SEK5.20. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year 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

The company's investors will be pleased to have been receiving dividend income for some time. Lindab International has impressed us by growing EPS at 21% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

We Really Like Lindab International's Dividend

Overall, a dividend increase is always good, and we think that Lindab International is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing 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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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