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

Coor Service Management Holding AB (STO:COOR) has announced that it will pay a dividend of SEK2.40 per share on the 9th of October. This means the annual payment is 9.0% of the current stock price, which is above the average for the industry.

See our latest analysis for Coor Service Management Holding

Coor Service Management Holding Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 100% of what it was earning and 82% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

Earnings per share is forecast to rise by 103.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 106%, which probably can't continue without putting some pressure on the balance sheet.

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. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of SEK1.40 in 2016 to the most recent total annual payment of SEK4.80. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Coor Service Management Holding has seen EPS rising for the last five years, at 8.9% per annum. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

Coor Service Management Holding's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Coor Service Management Holding's payments, as there could be some issues with sustaining them into the future. 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. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for Coor Service Management Holding that you should be aware of before investing. Is Coor Service Management Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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