Trelleborg (STO:TREL B) Will Pay A Larger Dividend Than Last Year At SEK7.50

Trelleborg AB (publ)'s (STO:TREL B) dividend will be increasing from last year's payment of the same period to SEK7.50 on 2nd of May. Although the dividend is now higher, the yield is only 1.8%, which is below the industry average.

Check out our latest analysis for Trelleborg

Trelleborg's Projected Earnings Seem Likely To Cover Future Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Trelleborg's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 48.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.

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 annual payment back then was SEK3.25, compared to the most recent full-year payment of SEK7.50. This works out to be a compound annual growth rate (CAGR) of approximately 8.7% a year over that time. 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 Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Trelleborg has seen EPS rising for the last five years, at 32% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Trelleborg could prove to be a strong dividend payer.

Trelleborg Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Trelleborg is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Trelleborg that investors should know about before committing capital to this stock. Is Trelleborg not quite the opportunity you were looking for? Why not check out our selection of top 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.