Securitas (STO:SECU B) Will Pay A Larger Dividend Than Last Year At kr4.40

Securitas AB (STO:SECU B) has announced that it will be increasing its dividend on the 12th of May to kr4.40. This makes the dividend yield about the same as the industry average at 4.0%.

Check out our latest analysis for Securitas

Securitas' Earnings Easily Cover the Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Securitas was quite comfortably earning enough to cover the dividend. 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 18.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 45% by next year, which is in a pretty sustainable range.

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 dividend has gone from kr3.00 in 2012 to the most recent annual payment of kr4.40. This implies that the company grew its distributions at a yearly rate of about 3.9% over that duration. 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.

Securitas May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Securitas has only grown its earnings per share at 3.5% per annum over the past five years. Growth of 3.5% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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 3 warning signs for Securitas that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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