Coor Service Management Holding (STO:COOR) Has Affirmed Its Dividend Of SEK2.40

The board of Coor Service Management Holding AB (STO:COOR) has announced that it will pay a dividend on the 9th of October, with investors receiving SEK2.40 per share. This makes the dividend yield 7.9%, which will augment investor returns quite nicely.

View our latest analysis for Coor Service Management Holding

Coor Service Management Holding's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, the dividend made up 82% of cash flows, but a higher proportion of net income. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

Over the next year, EPS is forecast to expand by 128.5%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 94% which is a bit high but can definitely be sustainable.

Coor Service Management Holding's Dividend Has Lacked Consistency

Coor Service Management Holding has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 7 years was SEK1.40 in 2016, and the most recent fiscal year payment was SEK4.80. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

There Isn't Much Room To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Coor Service Management Holding has grown earnings per share at 8.9% per year over the past five years. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 3 warning signs for Coor Service Management Holding that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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