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. This payment means the dividend yield will be 1.4%, which is below the average for the industry.

Check out our latest analysis for Studsvik

Studsvik's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Studsvik is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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 77.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 21%, which is in the range that makes us comfortable with the sustainability of the dividend.

Studsvik's Dividend Has Lacked Consistency

It's comforting to see that Studsvik has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2017, the dividend has gone from SEK1.00 total annually to SEK2.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Studsvik 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.

The Dividend Looks Likely To Grow

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. Studsvik has seen EPS rising for the last five years, at 61% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Studsvik's Dividend

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 don't think Studsvik is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Are management backing themselves to deliver performance? Check their shareholdings in Studsvik in our latest insider ownership analysis. Looking for more high-yielding dividend ideas? Try our collection 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.