Thule Group (STO:THULE) Is Reducing Its Dividend To SEK4.60

Thule Group AB (publ) (STO:THULE) has announced that on 10th of October, it will be paying a dividend ofSEK4.60, which a reduction from last year's comparable dividend. The yield is still above the industry average at 2.9%.

Check out our latest analysis for Thule Group

Thule Group's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. At the time of the last dividend payment, Thule Group was paying out a very large proportion of what it was earning and 121% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Over the next year, EPS is forecast to expand by 59.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 72%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Thule Group's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2015, the dividend has gone from SEK2.00 total annually to SEK9.20. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Thule Group Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Thule Group has grown earnings per share at 6.8% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 identified 3 warning signs for Thule Group (1 is a bit unpleasant!) that you should be aware of before investing. Is Thule Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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