Rejlers (STO:REJL B) Will Pay A Larger Dividend Than Last Year At SEK5.00

Rejlers AB (publ)'s (STO:REJL B) dividend will be increasing from last year's payment of the same period to SEK5.00 on 2nd of May. Despite this raise, the dividend yield of 2.7% is only a modest boost to shareholder returns.

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Rejlers' Future Dividend Projections Appear Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Rejlers' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 36.5%. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Rejlers

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. The annual payment during the last 10 years was SEK2.00 in 2015, and the most recent fiscal year payment was SEK5.00. This means that it has been growing its distributions at 9.6% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Rejlers might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

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. Rejlers has impressed us by growing EPS at 25% per year over the past five years. Rejlers is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like Rejlers' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Rejlers that you should be aware of before investing. Is Rejlers not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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