Scandi Standard's (STO:SCST) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Scandi Standard AB (publ) (STO:SCST) has announced that it will be paying its dividend of SEK2.50 on the 7th of May, an increased payment from last year's comparable dividend. This takes the dividend yield to 2.9%, which shareholders will be pleased with.

Check out our latest analysis for Scandi Standard

Scandi Standard's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Scandi Standard's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 71.8%. If the dividend continues on this path, the payout ratio could be 52% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from SEK1.30 total annually to SEK2.50. This implies that the company grew its distributions at a yearly rate of about 6.8% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Scandi Standard might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been crawling upwards at 3.2% per year. The company has been growing at a pretty soft 3.2% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Scandi Standard's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Scandi Standard that investors should know about before committing capital to this stock. 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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