Nilörngruppen's (STO:NIL B) Dividend Will Be Increased To SEK1.50

The board of Nilörngruppen AB (STO:NIL B) has announced that it will be paying its dividend of SEK1.50 on the 21st of May, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 2.4%, providing a nice boost to shareholder returns.

Check out our latest analysis for Nilörngruppen

Nilörngruppen's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Nilörngruppen's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 50.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 19%, which is in the range that makes us comfortable with the sustainability of the dividend.

Nilörngruppen's Dividend Has Lacked Consistency

It's comforting to see that Nilörngruppen has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of SEK3.00 in 2016 to the most recent total annual payment of SEK1.50. This works out to be a decline of approximately 7.4% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. However, Nilörngruppen has only grown its earnings per share at 4.5% per annum over the past five years. While growth may be thin on the ground, Nilörngruppen could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Nilörngruppen's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Nilörngruppen that investors should know about before committing capital to this stock. Is Nilörngruppen not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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