Profoto Holding (STO:PRFO) Has Announced That It Will Be Increasing Its Dividend To SEK4.00

Profoto Holding AB (publ)'s (STO:PRFO) dividend will be increasing from last year's payment of the same period to SEK4.00 on 12th of May. This will take the annual payment to 3.9% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Profoto Holding

Profoto Holding's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Profoto Holding's dividend made up quite a large proportion of earnings but only 73% of free cash flows. This leaves plenty of cash for reinvestment into the business.

If the trend of the last few years continues, EPS will grow by 17.4% over the next 12 months. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 65% which would be quite comfortable going to take the dividend forward.

Profoto Holding Doesn't Have A Long Payment History

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Dividend Growth Could Be Constrained

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Profoto Holding has been growing its earnings per share at 17% a year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

Our Thoughts On Profoto Holding's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Profoto Holding's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Profoto Holding 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.