Volati's (STO:VOLO) Dividend Will Be Increased To SEK2.00

Volati AB (publ) (STO:VOLO) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of May to SEK2.00. This will take the dividend yield to an attractive 1.8%, providing a nice boost to shareholder returns.

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

Volati's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before this announcement, Volati was paying out 76% of earnings, but a comparatively small 24% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

The next year is set to see EPS grow by 168.6%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 34% which brings it into quite a comfortable range.

Check out our latest analysis for Volati

Volati Doesn't Have A Long Payment History

It is great to see that Volati has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of SEK0.50 in 2017 to the most recent total annual payment of SEK2.00. This means that it has been growing its distributions at 19% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. It's not great to see that Volati's earnings per share has fallen at approximately 4.0% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Volati that investors need to be conscious of moving forward. Is Volati not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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