Coor Service Management Holding's (STO:COOR) Dividend Is Being Reduced To SEK0.50

Coor Service Management Holding AB (STO:COOR) has announced that on 8th of October, it will be paying a dividend ofSEK0.50, which a reduction from last year's comparable dividend. Based on this payment, the dividend yield will be 3.2%, which is lower than the average for the industry.

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Coor Service Management Holding's Future Dividend Projections Appear Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Coor Service Management Holding's dividend made up quite a large proportion of earnings but only 35% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

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 34%, which is in a comfortable range for us.

View our latest analysis for Coor Service Management Holding

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. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the annual payment back then was SEK1.40, compared to the most recent full-year payment of SEK1.50. Its dividends have grown at less than 1% per annum over this time frame. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Come By

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. Over the past five years, it looks as though Coor Service Management Holding's EPS has declined at around 6.2% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Coor Service Management Holding is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for Coor Service Management Holding (of which 1 doesn't sit too well with us!) 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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