AB Electrolux's (STO:ELUX B) Shareholders Will Receive A Bigger Dividend Than Last Year

May 17, 2022
  •  Updated
June 05, 2022
Source: Shutterstock

AB Electrolux (publ) (STO:ELUX B) has announced that it will be increasing its dividend on the 5th of October to kr4.60. This makes the dividend yield about the same as the industry average at 6.0%.

See our latest analysis for AB Electrolux

AB Electrolux's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, AB Electrolux's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 20.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 54% by next year, which is in a pretty sustainable range.

OM:ELUX B Historic Dividend May 17th 2022

AB Electrolux Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from kr6.50 in 2012 to the most recent annual payment of kr9.20. This means that it has been growing its distributions at 3.5% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

AB Electrolux May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. AB Electrolux hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On AB Electrolux's Dividend

In summary, while it's always good to see the dividend being raised, we don't think AB Electrolux's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, AB Electrolux has 4 warning signs (and 2 which are concerning) we think you should know about. Is AB Electrolux not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.