Storskogen Group's (STO:STOR B) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Storskogen Group AB (publ) (STO:STOR B) has announced that it will be paying its dividend of SEK0.10 on the 14th of May, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 1.0%.

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Storskogen Group's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Storskogen Group's Could Struggle to Maintain Dividend Payments In The Future

Storskogen Group's Future Dividends May Potentially Be At Risk

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Storskogen Group is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Over the next year, EPS is forecast to expand by 174.4%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

View our latest analysis for Storskogen Group

Storskogen Group Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2022, the annual payment back then was SEK0.07, compared to the most recent full-year payment of SEK0.10. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

Dividend Growth Is Doubtful

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Storskogen Group has seen earnings per share falling at 8.2% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Storskogen Group's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Storskogen Group that investors should know about before committing capital to this stock. Is Storskogen Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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