Investor's (STO:INVE A) Shareholders Will Receive A Bigger Dividend Than Last Year

Investor AB (publ)'s (STO:INVE A) dividend will be increasing from last year's payment of the same period to SEK1.10 on 9th of November. Based on this payment, the dividend yield for the company will be 2.0%, which is fairly typical for the industry.

View our latest analysis for Investor

Investor's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. The last payment was quite easily covered by earnings, but it made up 95% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

If the trend of the last few years continues, EPS will grow by 8.2% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 49% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from SEK1.75 total annually to SEK4.40. This implies that the company grew its distributions at a yearly rate of about 9.7% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

We Could See Investor's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Investor has impressed us by growing EPS at 8.2% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Investor's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Investor is earning enough to cover the payments, the cash flows are lacking. We don't think Investor 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Investor that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.