Kopparbergs Bryggeri (NGM:KOBR B) Could Be A Buy For Its Upcoming Dividend

Kopparbergs Bryggeri AB (publ) (NGM:KOBR B) stock is about to trade ex-dividend in three days. You can purchase shares before the 9th of December in order to receive the dividend, which the company will pay on the 15th of December.

Kopparbergs Bryggeri's next dividend payment will be kr1.75 per share. Last year, in total, the company distributed kr4.75 to shareholders. Last year's total dividend payments show that Kopparbergs Bryggeri has a trailing yield of 2.8% on the current share price of SEK171.5. If you buy this business for its dividend, you should have an idea of whether Kopparbergs Bryggeri's dividend is reliable and sustainable. So we need to investigate whether Kopparbergs Bryggeri can afford its dividend, and if the dividend could grow.

View our latest analysis for Kopparbergs Bryggeri

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Kopparbergs Bryggeri paid out a comfortable 48% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 25% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Kopparbergs Bryggeri paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Kopparbergs Bryggeri's earnings per share have been growing at 11% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Kopparbergs Bryggeri has delivered 1.5% dividend growth per year on average over the past five years. Earnings per share have been growing much quicker than dividends, potentially because Kopparbergs Bryggeri is keeping back more of its profits to grow the business.

The Bottom Line

Is Kopparbergs Bryggeri worth buying for its dividend? It's great that Kopparbergs Bryggeri is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Kopparbergs Bryggeri is facing. We've identified 2 warning signs with Kopparbergs Bryggeri (at least 1 which can't be ignored), and understanding them should be part of your investment process.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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