Sandvik AB (publ) (STO:SAND) will increase its dividend from last year's comparable payment on the 7th of May to SEK5.50. This takes the annual payment to 2.4% of the current stock price, which unfortunately is below what the industry is paying.
See our latest analysis for Sandvik
Sandvik's Earnings Easily Cover The Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Sandvik was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, earnings per share is forecast to rise by 54.3% over the next year. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.
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 SEK3.50 in 2014, and the most recent fiscal year payment was SEK5.50. This means that it has been growing its distributions at 4.6% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
Sandvik May Find It Hard To Grow The Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Sandvik's EPS was effectively flat over the past five years, which could stop the company from paying more every year.
Our Thoughts On Sandvik's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Sandvik's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Sandvik that investors should know about before committing capital to this stock. 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.
About OM:SAND
Sandvik
An engineering company, provides products and solutions for mining and rock excavation, metal cutting, and materials technology worldwide.
Undervalued with adequate balance sheet and pays a dividend.
