Creades' (STO:CRED A) Dividend Will Be SEK0.40

Creades AB (STO:CRED A) has announced that it will pay a dividend of SEK0.40 per share on the 2nd of February. This payment means that the dividend yield will be 2.1%, which is around the industry average.

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Creades' Projected Earnings Seem Likely To Cover Future Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Creades' dividend was only 17% of earnings, however it was paying out 180% of free cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, EPS could fall by 14.1% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 20%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

See our latest analysis for Creades

Creades Is Still Building Its Track Record

Creades' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2016, the annual payment back then was SEK1.40, compared to the most recent full-year payment of SEK1.60. This works out to be a compound annual growth rate (CAGR) of approximately 1.5% a year over that time. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Creades' EPS has fallen by approximately 14% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Creades' payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Creades has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Is Creades not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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