Nolato (STO:NOLA B) Is Due To Pay A Dividend Of SEK1.50

Nolato AB (publ)'s (STO:NOLA B) investors are due to receive a payment of SEK1.50 per share on 13th of May. This means the annual payment is 2.6% of the current stock price, which is above the average for the industry.

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Nolato's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Nolato 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.

The next year is set to see EPS grow by 49.6%. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Nolato

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from SEK0.80 total annually to SEK1.50. This implies that the company grew its distributions at a yearly rate of about 6.5% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, Nolato's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 Nolato that investors need to be conscious of moving forward. 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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