Nilörngruppen (STO:NIL B) Will Pay A Larger Dividend Than Last Year At kr5.00

Nilörngruppen AB (STO:NIL B) has announced that it will be increasing its dividend on the 10th of May to kr5.00. This makes the dividend yield 5.3%, which is above the industry average.

View our latest analysis for Nilörngruppen

Nilörngruppen's Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Nilörngruppen was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

EPS is set to fall by 30.2% over the next 12 months. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 92%, meaning that most of the company's earnings are being paid out to shareholders.

Nilörngruppen's Dividend Has Lacked Consistency

Nilörngruppen has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2016, the first annual payment was kr3.00, compared to the most recent full-year payment of kr5.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.9% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Nilörngruppen Could Grow Its Dividend

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. We are encouraged to see that Nilörngruppen has grown earnings per share at 9.2% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Our Thoughts On Nilörngruppen's Dividend

Overall, we always like to see the dividend being raised, but we don't think Nilörngruppen will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Nilörngruppen has been making. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Nilörngruppen (of which 1 is significant!) 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.