Lifco (STO:LIFCO B) Is Paying Out A Larger Dividend Than Last Year

Lifco AB (publ) (STO:LIFCO B) has announced that it will be increasing its dividend from last year's comparable payment on the 8th of May to SEK1.80. This takes the annual payment to 0.9% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Lifco

Lifco's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, Lifco's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 11.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.

Lifco Is Still Building Its Track Record

It is great to see that Lifco has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2015, the dividend has gone from SEK0.52 total annually to SEK1.80. This means that it has been growing its distributions at 17% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Lifco has impressed us by growing EPS at 21% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Lifco's Dividend

Overall, a dividend increase is always good, and we think that Lifco is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Lifco that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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