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 on the 19th of December to SEK3.00, which is 7.1% higher than last year's payment from the same period of SEK2.80. Despite this raise, the dividend yield of 1.8% is only a modest boost to shareholder returns.

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SkiStar's Future Dividend Projections Appear Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. The last dividend was quite easily covered by SkiStar's earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 37.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for SkiStar

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was SEK2.00, compared to the most recent full-year payment of SEK2.80. This means that it has been growing its distributions at 3.4% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

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 14% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

SkiStar 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. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for SkiStar that investors need to be conscious of moving forward. Is SkiStar 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.