Malmbergs Elektriska (STO:MEAB B) Is Paying Out A Larger Dividend Than Last Year

The board of Malmbergs Elektriska AB (publ) (STO:MEAB B) has announced that it will be increasing its dividend by 33% on the 3rd of May to SEK2.00, up from last year's comparable payment of SEK1.50. This will take the annual payment to 2.8% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Malmbergs Elektriska

Malmbergs Elektriska's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Malmbergs Elektriska's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, EPS could fall by 3.9% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 37%, which is definitely feasible to continue.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the dividend has gone from SEK3.00 total annually to SEK1.50. The dividend has shrunk at around 6.7% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Achieve

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Malmbergs Elektriska has seen earnings per share falling at 3.9% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Malmbergs Elektriska will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Malmbergs Elektriska (of which 1 makes us a bit uncomfortable!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.