Volati's (STO:VOLO) Upcoming Dividend Will Be Larger Than Last Year's

The board of Volati AB (STO:VOLO) has announced that it will be increasing its dividend on the 4th of May to kr1.70. This will take the annual payment from 0.9% to 5.4% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Volati

Volati Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Volati was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Earnings per share is forecast to rise by 36.7% over the next year. 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.

Volati Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 5 years of history we want to see a few more years of history before making any solid conclusions. The first annual payment during the last 5 years was kr0.50 in 2017, and the most recent fiscal year payment was kr1.70. This works out to be a compound annual growth rate (CAGR) of approximately 28% a year 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.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Volati has seen EPS rising for the last five years, at 16% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Volati's prospects of growing its dividend payments in the future.

Volati Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Volati 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 performing dividend stock.

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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.