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

The board of VBG Group AB (publ) (STO:VBG B) has announced that it will be paying its dividend of SEK7.25 on the 20th of May, an increased payment from last year's comparable dividend. This takes the annual payment to 2.7% of the current stock price, which is about average for the industry.

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

VBG Group's Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, based ont he last payment, VBG Group was earning enough to cover the dividend pretty comfortably. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

Over the next year, EPS is forecast to expand by 13.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.

View our latest analysis for VBG Group

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. Since 2015, the dividend has gone from SEK3.00 total annually to SEK7.25. This works out to be a compound annual growth rate (CAGR) of approximately 9.2% 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

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. VBG Group has seen EPS rising for the last five years, at 14% per annum. VBG Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On VBG Group's Dividend

In summary, while it's always good to see the dividend being raised, we don't think VBG Group's payments are rock solid. While VBG Group is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think VBG Group is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for VBG Group that you should be aware of before investing. Is VBG Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.