New Wave Group (STO:NEWA B) Has Affirmed Its Dividend Of SEK1.75

New Wave Group AB (publ) (STO:NEWA B) will pay a dividend of SEK1.75 on the 5th of December. This makes the dividend yield 2.9%, which will augment investor returns quite nicely.

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New Wave Group's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, New Wave Group was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 61.7% over the next year. If the dividend continues on this path, the payout ratio could be 40% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for New Wave Group

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was SEK0.50 in 2015, and the most recent fiscal year payment was SEK3.50. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. New Wave Group has impressed us by growing EPS at 23% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that New Wave Group could prove to be a strong dividend payer.

We Really Like New Wave Group's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an 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. For instance, we've picked out 1 warning sign for New Wave Group that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.