Resurs Holding (STO:RESURS) Has Announced That Its Dividend Will Be Reduced To SEK1.07

Resurs Holding AB (publ)'s (STO:RESURS) dividend is being reduced from last year's payment covering the same period to SEK1.07 on the 4th of May. However, the dividend yield of 8.1% is still a decent boost to shareholder returns.

See our latest analysis for Resurs Holding

Resurs Holding's Earnings Will Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Resurs Holding has a good history of paying out dividends, with its current track record at 6 years. Past distributions do not necessarily guarantee future ones, but Resurs Holding's payout ratio of 51% is a good sign for current shareholders as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 7.3% over the next 3 years. Analysts estimate the future payout ratio will be 57% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Resurs Holding's Dividend Has Lacked Consistency

It's comforting to see that Resurs Holding has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the dividend has gone from SEK3.00 total annually to SEK1.99. Doing the maths, this is a decline of about 6.6% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. In the last five years, Resurs Holding's earnings per share has shrunk at approximately 6.3% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Resurs Holding's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While Resurs Holding is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Resurs Holding (1 shouldn't be ignored!) 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.

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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.