Nederman Holding (STO:NMAN) Is Increasing Its Dividend To SEK3.95

Nederman Holding AB (publ) (STO:NMAN) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of May to SEK3.95. This takes the dividend yield to 2.3%, which shareholders will be pleased with.

View our latest analysis for Nederman Holding

Nederman Holding's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Nederman Holding's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share could rise by 10.9% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 40% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was SEK1.33 in 2014, and the most recent fiscal year payment was SEK3.95. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Nederman Holding has grown earnings per share at 11% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Nederman Holding Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Nederman Holding is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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 2 warning signs for Nederman Holding that investors need to be conscious of moving forward. Is Nederman Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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