SinterCast (STO:SINT) Has Announced A Dividend Of SEK3.05

SinterCast AB (publ)'s (STO:SINT) investors are due to receive a payment of SEK3.05 per share on 12th of November. This takes the dividend yield to 4.9%, which shareholders will be pleased with.

View our latest analysis for SinterCast

SinterCast's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend made up a very large portion of earnings and also represented 89% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

Earnings per share is forecast to rise by 39.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 84%, which is on the higher side, but certainly still feasible.

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 dividend has gone from an annual total of SEK1.20 in 2014 to the most recent total annual payment of SEK6.10. This means that it has been growing its distributions at 18% per annum 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.

SinterCast May Find It Hard To Grow The Dividend

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. However, SinterCast has only grown its earnings per share at 2.7% per annum over the past five years. Slow growth and a high payout ratio could mean that SinterCast has maxed out the amount that it has been able to pay to shareholders. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

In Summary

Overall, we always like to see the dividend being raised, but we don't think SinterCast will make a great income stock. The payments are bit high to be considered sustainable, and the track record isn't the best. This company is not in the top tier of income providing stocks.

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. For example, we've picked out 2 warning signs for SinterCast that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.