Duni's (STO:DUNI) Dividend Will Be SEK2.50

Duni AB (publ) (STO:DUNI) will pay a dividend of SEK2.50 on the 14th of November. Based on this payment, the dividend yield on the company's stock will be 5.5%, which is an attractive boost to shareholder returns.

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Duni's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

EPS is set to grow by 25.0% over the next year if recent trends continue. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 85%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

See our latest analysis for Duni

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 an annual total of SEK4.50 in 2015 to the most recent total annual payment of SEK5.00. This works out to be a compound annual growth rate (CAGR) of approximately 1.1% a year over that time. 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.

Dividend Growth Could Be Constrained

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. We are encouraged to see that Duni has grown earnings per share at 25% per year over the past five years. Although earnings per share is up nicely Duni is paying out 107% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

Duni'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 Duni'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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 4 warning signs for Duni (1 is a bit concerning!) that you should be aware of before investing. Is Duni not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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