Studsvik (STO:SVIK) Has Affirmed Its Dividend Of SEK2.00

The board of Studsvik AB (publ) (STO:SVIK) has announced that it will pay a dividend of SEK2.00 per share on the 2nd of May. Including this payment, the dividend yield on the stock will be 1.7%, which is a modest boost for shareholders' returns.

See our latest analysis for Studsvik

Studsvik's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Studsvik's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The next year is set to see EPS grow by 23.2%. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of SEK1.00 in 2013 to the most recent total annual payment of SEK2.00. This means that it has been growing its distributions at 7.2% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Studsvik has seen EPS rising for the last five years, at 61% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Studsvik is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've picked out 3 warning signs for Studsvik that investors should know about before committing capital to this stock. Is Studsvik not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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