Nederman Holding's (STO:NMAN) Dividend Will Be Increased To SEK4.00

The board of Nederman Holding AB (publ) (STO:NMAN) has announced that it will be paying its dividend of SEK4.00 on the 7th of May, an increased payment from last year's comparable dividend. This takes the dividend yield to 2.2%, which shareholders will be pleased with.

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Nederman Holding's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Nederman Holding was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

If the trend of the last few years continues, EPS will grow by 8.8% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 41% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Nederman Holding

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was SEK1.33 in 2015, and the most recent fiscal year payment was SEK4.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Nederman Holding has grown earnings per share at 8.8% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like Nederman Holding's Dividend

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. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign 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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