BTS Group (STO:BTS B) Is Paying Out A Larger Dividend Than Last Year

BTS Group AB (publ) (STO:BTS B) has announced that it will be increasing its dividend from last year's comparable payment on the 18th of November to SEK2.40. This takes the annual payment to 1.6% of the current stock price, which unfortunately is below what the industry is paying.

Check out the opportunities and risks within the SE Professional Services industry.

BTS Group's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, BTS Group was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 30.4%. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.

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. The dividend has gone from an annual total of SEK1.60 in 2012 to the most recent total annual payment of SEK4.80. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

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. We are encouraged to see that BTS Group has grown earnings per share at 23% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

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. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. See if management have their own wealth at stake, by checking insider shareholdings in BTS Group stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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