Investor's (STO:INVE A) Upcoming Dividend Will Be Larger Than Last Year's

Investor AB (publ)'s (STO:INVE A) dividend will be increasing from last year's payment of the same period to SEK3.75 on 14th of May. This takes the annual payment to 1.7% of the current stock price, which is about average for the industry.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

Investor's Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. But before making this announcement, Investor's earnings quite easily covered the dividend. The business is earning enough to make the dividend feasible, but the cash payout ratio of 83% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

Looking forward, earnings per share could rise by 2.3% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Investor

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was SEK2.00 in 2015, and the most recent fiscal year payment was SEK5.20. This means that it has been growing its distributions at 10% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Investor has only grown its earnings per share at 2.3% per annum over the past five years. While growth may be thin on the ground, Investor could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Investor will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Investor has been making. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Investor that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.