Coor Service Management Holding (STO:COOR) Is Paying Out A 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. The dividend yield will be 7.2% based on this payment which is still above the industry average.

View our latest analysis for Coor Service Management Holding

Coor Service Management Holding's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the company was paying out 100% of what it was earning and 82% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

Over the next year, EPS is forecast to expand by 128.5%. If the dividend continues along recent trends, we estimate the payout ratio could reach 94%, which is on the higher side, but certainly still feasible.

Coor Service Management Holding's Dividend Has Lacked Consistency

Looking back, Coor Service Management Holding's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. 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. 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.

Coor Service Management Holding May Have Challenges Growing 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. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

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. 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 probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. 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. 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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