Investor (STO:INVE A) Is Increasing Its Dividend To SEK3.30

Investor AB (publ) (STO:INVE A) has announced that it will be increasing its dividend from last year's comparable payment on the 10th of May to SEK3.30. The payment will take the dividend yield to 2.1%, which is in line with the average for the industry.

See our latest analysis for Investor

Investor Might Find It Hard To Continue The Dividend

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. These payout levels would generally be quite difficult to keep up.

If the trend of the last few years continues, EPS will grow by 7.9% over the next 12 months. The company seems to be going down the right path, but it will probably take a little bit longer than a year to cross over into profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.

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. The dividend has gone from an annual total of SEK1.50 in 2013 to the most recent total annual payment of SEK4.40. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Investor has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Investor Could Grow Its Dividend

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. Investor has seen EPS rising for the last five years, at 7.9% per annum. It's not an ideal situation that the company isn't turning a profit but the growth recently is a positive sign. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid dividend payer.

Investor's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments are bit high to be considered sustainable, and the track record isn't the best. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Investor that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.