Cloetta (STO:CLA B) Has Announced A Dividend Of SEK1.00

Cloetta AB (publ)'s (STO:CLA B) investors are due to receive a payment of SEK1.00 per share on 17th of April. The dividend yield will be 3.9% based on this payment which is still above the industry average.

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Cloetta's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Cloetta's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 27.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 50% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Cloetta

Cloetta's Dividend Has Lacked Consistency

Looking back, Cloetta's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2016, the annual payment back then was SEK0.50, compared to the most recent full-year payment of SEK1.10. This means that it has been growing its distributions at 9.2% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Unfortunately, Cloetta's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Cloetta that investors should take into consideration. 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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