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

Trelleborg AB (publ) (STO:TREL B) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of May to SEK7.50. Despite this raise, the dividend yield of 2.4% is only a modest boost to shareholder returns.

Our free stock report includes 1 warning sign investors should be aware of before investing in Trelleborg. Read for free now.

Trelleborg's Payment Could Potentially Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. The last dividend was quite easily covered by Trelleborg's earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 33.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Trelleborg

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was SEK3.25 in 2015, and the most recent fiscal year payment was SEK7.50. This works out to be a compound annual growth rate (CAGR) of approximately 8.7% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Trelleborg might have put its house in order since then, but we remain cautious.

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. It's encouraging to see that Trelleborg has been growing its earnings per share at 32% a year over the past five years. 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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Taking the debate a bit further, we've identified 1 warning sign for Trelleborg 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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