L E Lundbergföretagen (STO:LUND B) Is Increasing Its Dividend To kr3.75

L E Lundbergföretagen AB (publ) (STO:LUND B) has announced that it will be increasing its dividend on the 13th of April to kr3.75. Even though the dividend went up, the yield is still quite low at only 0.8%.

See our latest analysis for L E Lundbergföretagen

L E Lundbergföretagen's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, L E Lundbergföretagen was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 1.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 8.8%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the first annual payment was kr1.88, compared to the most recent full-year payment of kr3.75. This means that it has been growing its distributions at 7.2% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. L E Lundbergföretagen might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Achieve

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. However, L E Lundbergföretagen's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On L E Lundbergföretagen's Dividend

Overall, we always like to see the dividend being raised, but we don't think L E Lundbergföretagen will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for L E Lundbergföretagen that investors should take into consideration. Is L E Lundbergföretagen 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.