Creades (STO:CRED A) Will Pay A Dividend Of SEK0.40

Creades AB (STO:CRED A) has announced that it will pay a dividend of SEK0.40 per share on the 1st of August. This payment means that the dividend yield will be 2.0%, which is around the industry average.

We've discovered 2 warning signs about Creades. View them for free.

Creades' Payment Could Potentially Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Creades was paying a whopping 128% as a dividend, but this only made up 15% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS could expand by 24.0% if recent trends continue. If the dividend continues on this path, the payout ratio could be 13% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Creades

Creades Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 8 years was SEK1.40 in 2017, and the most recent fiscal year payment was SEK1.60. This means that it has been growing its distributions at 1.7% per annum over that time. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Creades has grown earnings per share at 24% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

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 don't think Creades is a great stock to add to your portfolio if income is your focus.

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 identified 2 warning signs for Creades (1 is a bit unpleasant!) that you should be aware of before investing. Is Creades not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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