JM (STO:JM) Is Increasing Its Dividend To kr13.50

JM AB (publ)'s (STO:JM) dividend will be increasing to kr13.50 on 7th of April. The announced payment will take the dividend yield to 4.0%, which is in line with the average for the industry.

Check out our latest analysis for JM

JM's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, JM was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Over the next year, EPS is forecast to fall by 7.3%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 60%, which is comfortable for the company to continue in the future.

JM Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was kr4.50 in 2012, and the most recent fiscal year payment was kr13.50. This means that it has been growing its distributions at 12% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

JM Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see JM has been growing its earnings per share at 5.2% a year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On JM's Dividend

In summary, while it's always good to see the dividend being raised, we don't think JM's payments are rock solid. While JM is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, JM has 3 warning signs (and 2 which shouldn't be ignored) we think you should know about. We have also put together a list of global stocks with a solid dividend.

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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.