Viva Wine Group (STO:VIVA) Has Affirmed Its Dividend Of SEK1.55

The board of Viva Wine Group AB (STO:VIVA) has announced that it will pay a dividend of SEK1.55 per share on the 30th of May. Based on this payment, the dividend yield on the company's stock will be 4.0%, which is an attractive boost to shareholder returns.

View our latest analysis for Viva Wine Group

Viva Wine Group's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, the company's dividend was higher than its profits, and made up 76% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

Looking forward, earnings per share is forecast to rise by 124.6% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 58% which brings it into quite a comfortable range.

Viva Wine Group Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2022, the dividend has gone from SEK1.50 total annually to SEK1.55. This works out to be a compound annual growth rate (CAGR) of approximately 1.7% a year over that time. Viva Wine Group hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

Viva Wine Group May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Although it's important to note that Viva Wine Group's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. The earnings growth is anaemic, and the company is paying out 130% of its profit. Limited recent earnings growth and a high payout ratio makes it hard for us to envision strong future dividend growth, unless the company should have substantial pricing power or some form of competitive advantage.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Viva Wine Group's payments, as there could be some issues with sustaining them into the future. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

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 instance, we've picked out 2 warning signs for Viva Wine Group that investors should take into consideration. 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.