Thule Group (STO:THULE) Is Increasing Its Dividend To kr6.50

Thule Group AB (publ) (STO:THULE) will increase its dividend on the 11th of October to kr6.50. This will take the dividend yield from 4.9% to 4.9%, providing a nice boost to shareholder returns.

View our latest analysis for Thule Group

Thule Group's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Thule Group was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. We think that this practice can make the dividend quite risky in the future.

Looking forward, earnings per share is forecast to fall by 4.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 94%, which is definitely on the higher side.

Thule Group's Dividend Has Lacked Consistency

Looking back, Thule Group's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2015, the dividend has gone from kr2.00 to kr13.00. This works out to be a compound annual growth rate (CAGR) of approximately 31% a year over that time. Thule 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Thule Group has seen EPS rising for the last five years, at 21% per annum. However, Thule Group isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

Our Thoughts On Thule Group's Dividend

Overall, we always like to see the dividend being raised, but we don't think Thule Group will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Thule Group you should be aware of, and 1 of them is concerning. 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.