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 9.1% based on this payment which is still above the industry average.

View our latest analysis for Coor Service Management Holding

Coor Service Management Holding Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was higher than its profits, and made up 82% 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 103.2%. If the dividend continues on its recent course, the payout ratio in 12 months could be 106%, which is a bit high and could start applying pressure to the balance sheet.

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 suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of SEK1.40 in 2016 to the most recent total annual payment of 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 evaluate if earnings per share is growing, which could point to a growing dividend in the future. Coor Service Management Holding has impressed us by growing EPS at 8.9% per year over the past five years. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

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. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. 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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