Loomis' (STO:LOOMIS) Shareholders Will Receive A Bigger Dividend Than Last Year

Loomis AB (publ) (STO:LOOMIS) will increase its dividend from last year's comparable payment on the 14th of May to SEK12.50. This makes the dividend yield about the same as the industry average at 4.6%.

View our latest analysis for Loomis

Loomis' Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Loomis' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 75.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was SEK4.50, compared to the most recent full-year payment of SEK12.50. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Unfortunately, Loomis' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 0.6% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On Loomis' Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. As an example, we've identified 1 warning sign for Loomis that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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