AcadeMedia (STO:ACAD) Has Announced That It Will Be Increasing Its Dividend To kr1.75

AcadeMedia AB (publ) (STO:ACAD) will increase its dividend on the 7th of December to kr1.75. This makes the dividend yield about the same as the industry average at 2.3%.

See our latest analysis for AcadeMedia

AcadeMedia's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, AcadeMedia's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 8.7%. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

AcadeMedia Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2019, the dividend has gone from kr1.25 to kr1.75. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

We Could See AcadeMedia's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see AcadeMedia has been growing its earnings per share at 8.6% a year over the past five years. AcadeMedia definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

AcadeMedia Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for AcadeMedia that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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.
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