AAK AB (publ.) (STO:AAK) has announced that it will be increasing its dividend from last year's comparable payment on the 16th of May to SEK3.70. This makes the dividend yield about the same as the industry average at 1.6%.
View our latest analysis for AAK AB (publ.)
AAK AB (publ.)'s Earnings Easily Cover The Distributions
Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, AAK AB (publ.)'s dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 17.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 31%, which is in the range that makes us comfortable with the sustainability of the dividend.
AAK AB (publ.) Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from SEK0.875 total annually to SEK3.70. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. AAK AB (publ.) has seen EPS rising for the last five years, at 17% per annum. AAK AB (publ.) definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
AAK AB (publ.) Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that AAK AB (publ.) is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an 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. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 6 analysts we track are forecasting for AAK AB (publ.) for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
About OM:AAK
AAK AB (publ.)
Develops and sells plant-based oils and fats in Sweden and internationally.
Flawless balance sheet with solid track record and pays a dividend.
