Thule Group's (STO:THULE) Upcoming Dividend Will Be Larger Than Last Year's

Thule Group AB (publ)'s (STO:THULE) dividend will be increasing from last year's payment of the same period to SEK4.75 on 6th of May. This makes the dividend yield 3.1%, which is above the industry average.

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. The last payment made up 91% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 53.5%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 69% which would be quite comfortable going to take the dividend forward.

Thule Group's Dividend Has Lacked Consistency

Looking back, Thule Group's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2015, the dividend has gone from SEK2.00 total annually to SEK9.50. This means that it has been growing its distributions at 19% per annum 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.

We Could See Thule Group's Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Thule Group has impressed us by growing EPS at 5.0% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Thule Group'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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Thule Group that investors should take into consideration. 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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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.