The board of AcadeMedia AB (publ) (STO:ACAD) has announced that it will pay a dividend of SEK1.75 per share on the 7th of December. The dividend yield will be 3.5% based on this payment which is still above the industry average.
View our latest analysis for AcadeMedia
AcadeMedia's Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, AcadeMedia's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 50.9%. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.
AcadeMedia Doesn't Have A Long Payment History
Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The annual payment during the last 3 years was SEK1.25 in 2019, and the most recent fiscal year payment was SEK1.75. This implies that the company grew its distributions at a yearly rate of about 12% 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.
The Dividend Has Growth Potential
Investors could be attracted to the stock based on the quality of its payment history. AcadeMedia has impressed us by growing EPS at 5.3% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Our Thoughts On AcadeMedia's Dividend
Overall, we think AcadeMedia is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. 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 collection 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.
About OM:ACAD
AcadeMedia
Operates as an independent education provider in Sweden, Norway, the Netherlands, and Germany.
Undervalued with solid track record.
