SkiStar (STO:SKIS B) Has Announced That It Will Be Increasing Its Dividend To SEK3.00

SkiStar AB (publ) (STO:SKIS B) will increase its dividend from last year's comparable payment on the 16th of December to SEK3.00. This takes the dividend yield to 2.6%, which shareholders will be pleased with.

Check out our latest analysis for SkiStar

SkiStar's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, SkiStar'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.

Looking forward, earnings per share is forecast to fall by 13.9% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 41%, which is comfortable for the company to continue in the future.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the annual payment back then was SEK1.75, compared to the most recent full-year payment of SEK3.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.5% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. SkiStar might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. SkiStar has seen EPS rising for the last five years, at 11% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for SkiStar's prospects of growing its dividend payments in the future.

We Really Like SkiStar's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for SkiStar you should be aware of, and 1 of them is a bit unpleasant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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