The board of JM AB (publ) (STO:JM) has announced that it will be increasing its dividend on the 7th of April to kr13.50. This takes the annual payment to 4.3% of the current stock price, which is about average for the industry.
Check out our latest analysis for JM
JM's Payment Has Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much. 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.
Looking forward, earnings per share is forecast to fall by 7.3% over the next year. 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 a sustained record of paying dividends with very little fluctuation. Since 2012, the first annual payment was kr4.50, compared to the most recent full-year payment of kr13.50. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
We Could See JM's Dividend Growing
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. JM has impressed us by growing EPS at 5.2% per 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
Overall, we always like to see the dividend being raised, but we don't think JM will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 4 warning signs (and 2 which are a bit unpleasant) we think you should know about. Is JM not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
About OM:JM
JM
Develops and sells housing and residential areas in the Nordic region.
Reasonable growth potential with mediocre balance sheet.
