BTS Group AB (publ) (STO:BTS B) will pay a dividend of SEK2.85 on the 18th of November. Even though the dividend went up, the yield is still quite low at only 1.9%.
See our latest analysis for BTS Group
BTS Group's Earnings Easily Cover The Distributions
If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, BTS Group'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.
Looking forward, earnings per share is forecast to rise by 17.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 42%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from SEK1.75 total annually to SEK5.70. This means that it has been growing its distributions at 13% per annum over that time. BTS Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. BTS Group has seen EPS rising for the last five years, at 13% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.
BTS Group Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that BTS Group 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.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 3 warning signs for BTS Group that you should be aware of before investing. Is BTS Group 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.
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About OM:BTS B
Excellent balance sheet with proven track record and pays a dividend.
