Resurs Holding's (STO:RESURS) Shareholders Will Receive A Smaller Dividend Than Last Year

Resurs Holding AB (publ) (STO:RESURS) has announced that on 4th of May, it will be paying a dividend ofSEK1.07, which a reduction from last year's comparable dividend. The yield is still above the industry average at 8.6%.

See our latest analysis for Resurs Holding

Resurs Holding's Payment Expected To Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having paid out dividends for 6 years, Resurs Holding has a good history of paying out a part of its earnings to shareholders. 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 7.2% over the next 3 years. Analysts estimate the future payout ratio will be 56% 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. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2017, the annual payment back then was SEK3.00, compared to the most recent full-year payment of SEK1.99. This works out to be a decline of approximately 6.6% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Is Doubtful

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Resurs Holding has seen earnings per share falling at 6.3% per year over the last five years. 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. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

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 probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, Resurs Holding has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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