AB Electrolux's (STO:ELUX B) Dividend Will Be Increased To kr4.60

June 05, 2022
  •  Updated
July 05, 2022
OM:ELUX B
Source: Shutterstock

AB Electrolux (publ) (STO:ELUX B) will increase its dividend on the 5th of October to kr4.60. The announced payment will take the dividend yield to 6.0%, which is in line with the average for the industry.

Check out our latest analysis for AB Electrolux

AB Electrolux's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, AB Electrolux was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

The next year is set to see EPS grow by 20.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 54%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
OM:ELUX B Historic Dividend June 5th 2022

AB Electrolux Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from kr6.50 in 2012 to the most recent annual payment of kr9.20. This works out to be a compound annual growth rate (CAGR) of approximately 3.5% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

AB Electrolux May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Unfortunately, AB Electrolux's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

Overall, we always like to see the dividend being raised, but we don't think AB Electrolux will make a great income stock. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

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. Just as an example, we've come across 4 warning signs for AB Electrolux you should be aware of, and 2 of them don't sit too well with us. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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