Cedergrenska (STO:CEDER) Is Due To Pay A Dividend Of SEK1.90

The board of Cedergrenska AB (publ) (STO:CEDER) has announced that it will pay a dividend on the 29th of December, with investors receiving SEK1.90 per share. This will take the dividend yield to an attractive 9.3%, providing a nice boost to shareholder returns.

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Cedergrenska's Projections Indicate Future Payments May Be Unsustainable

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 117% of what it was earning and 75% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

Looking forward, EPS could fall by 1.1% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 274%, which could put the dividend under pressure if earnings don't start to improve.

View our latest analysis for Cedergrenska

Cedergrenska 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 2 years was SEK0.50 in 2023, and the most recent fiscal year payment was SEK4.20. This means that it has been growing its distributions at 190% per annum over that time. 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.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Unfortunately, Cedergrenska's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Cedergrenska's payments are rock solid. The track record isn't great, and the payments are a bit high to be considered sustainable. 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. To that end, Cedergrenska has 3 warning signs (and 1 which can't be ignored) we think you should know about. Is Cedergrenska not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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