Coor Service Management Holding's (STO:COOR) Shareholders Will Receive A Bigger Dividend Than Last Year

Coor Service Management Holding AB's (STO:COOR) dividend will be increasing to kr2.40 on 6th of May. This takes the dividend yield from 5.9% to 5.9%, which shareholders will be pleased with.

View our latest analysis for Coor Service Management Holding

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Coor Service Management Holding's dividend made up quite a large proportion of earnings but only 68% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Earnings per share is forecast to rise by 28.8% over the next year. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 144% over the next year.

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. This makes us cautious about the consistency of the dividend over a full economic cycle. The first annual payment during the last 6 years was kr1.40 in 2016, and the most recent fiscal year payment was kr4.80. This implies that the company grew its distributions at a yearly rate of about 23% 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.

Coor Service Management Holding Might Find It Hard To Grow Its 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 17% per annum. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Our Thoughts On Coor Service Management Holding's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Coor Service Management Holding's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Coor Service Management Holding that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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.