Studsvik's (STO:SVIK) Dividend Will Be SEK2.00

Studsvik AB (publ)'s (STO:SVIK) investors are due to receive a payment of SEK2.00 per share on 2nd of May. The dividend yield is 1.6% based on this payment, which is a little bit low compared to the other companies in the industry.

See our latest analysis for Studsvik

Studsvik's Projected Earnings Seem Likely To Cover Future Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, the dividend made up 171% of earnings, and the company was generating negative free cash flows. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 22%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

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. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 8 years was SEK1.00 in 2017, and the most recent fiscal year payment was SEK2.00. This means that it has been growing its distributions at 9.1% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Studsvik's Dividend Might Lack Growth

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. It's encouraging to see that Studsvik has been growing its earnings per share at 16% a year over the past five years. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

Studsvik's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Studsvik's payments, as there could be some issues with sustaining them into the future. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would probably look elsewhere for an income investment.

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. As an example, we've identified 2 warning signs for Studsvik 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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