Investor (STO:INVE A) Is Increasing Its Dividend To SEK3.60

Investor AB (publ) (STO:INVE A) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of May to SEK3.60. This takes the annual payment to 1.8% of the current stock price, which is about average for the industry.

See our latest analysis for Investor

Investor's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Investor was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 48.7% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 6.5%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of SEK2.00 in 2014 to the most recent total annual payment of SEK4.80. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Investor has impressed us by growing EPS at 49% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Investor Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Investor is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Investor (1 shouldn't be ignored!) that you should be aware of before investing. Is Investor 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.