New Wave Group (STO:NEWA B) Will Pay A Dividend Of SEK1.75

New Wave Group AB (publ)'s (STO:NEWA B) investors are due to receive a payment of SEK1.75 per share on 5th of December. This makes the dividend yield 3.3%, 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. Prior to this announcement, New Wave Group's dividend was comfortably covered by both cash flow and earnings. 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 62.1% 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.

See our latest analysis for New Wave Group

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from SEK0.50 total annually to SEK3.50. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. New Wave Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that New Wave Group has grown earnings per share at 23% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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 example, we've picked out 1 warning sign for New Wave Group that investors should know about before committing capital to this stock. 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.