Coor Service Management Holding (STO:COOR) Is Due To Pay A Dividend Of SEK2.40

Coor Service Management Holding AB's (STO:COOR) investors are due to receive a payment of SEK2.40 per share on 9th of October. This makes the dividend yield 10.0%, which will augment investor returns quite nicely.

Check out our latest analysis for Coor Service Management Holding

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

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 120% of what it was earning and 90% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

The next 12 months is set to see EPS grow by 150.9%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 103% over the next year.

Coor Service Management Holding's Dividend Has Lacked Consistency

It's comforting to see that Coor Service Management Holding has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2016, the dividend has gone from SEK1.40 total annually to SEK4.80. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Coor Service Management Holding 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.

There Isn't Much Room To Grow The Dividend

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. Coor Service Management Holding has seen EPS rising for the last five years, at 9.8% 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

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Strong earnings growth means Coor Service Management Holding has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Coor Service Management Holding that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.