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

The board of 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. This takes the annual payment to 0.8% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for L E Lundbergföretagen

L E Lundbergföretagen's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, L E Lundbergföretagen 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.

EPS is set to fall by 1.5% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 8.8%, which is definitely feasible to continue.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was kr1.88 in 2012, and the most recent fiscal year payment was kr3.75. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% 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.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. L E Lundbergföretagen hasn't seen much change in its earnings per share over the last five years.

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. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for L E Lundbergföretagen that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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