Cloetta (STO:CLA B) Is Due To Pay A Dividend Of SEK1.00

The board of Cloetta AB (publ) (STO:CLA B) has announced that it will pay a dividend on the 16th of April, with investors receiving SEK1.00 per share. Based on this payment, the dividend yield on the company's stock will be 5.6%, which is an attractive boost to shareholder returns.

See our latest analysis for Cloetta

Cloetta's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Cloetta was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 5.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 66% by next year, which is in a pretty sustainable range.

Cloetta's Dividend Has Lacked Consistency

Cloetta has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 8 years was SEK0.50 in 2016, and the most recent fiscal year payment was SEK1.00. This means that it has been growing its distributions at 9.1% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Cloetta might have put its house in order since then, but we remain cautious.

Cloetta May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Cloetta hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Cloetta's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Cloetta's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Cloetta is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Cloetta that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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