Coor Service Management Holding (STO:COOR) Has Announced A Dividend Of SEK1.00

Coor Service Management Holding AB (STO:COOR) will pay a dividend of SEK1.00 on the 5th of May. The dividend yield will be in the average range for the industry at 4.5%.

Check out our latest analysis for Coor Service Management Holding

Coor Service Management Holding's Payment Could Potentially Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Coor Service Management Holding was paying out 75% of earnings and more than 75% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 37%, which is in a comfortable range for us.

Coor Service Management Holding's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. 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 SEK1.50. Dividend payments have grown at less than 1% a year over this period. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, Coor Service Management Holding's earnings per share has shrunk at approximately 5.5% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

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

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Coor Service Management Holding (of which 1 makes us a bit uncomfortable!) you should know about. 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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