Dedicare's (STO:DEDI) Shareholders Will Receive A Smaller Dividend Than Last Year

Dedicare AB (publ) (STO:DEDI) has announced that on 6th of May, it will be paying a dividend ofSEK2.50, which a reduction from last year's comparable dividend. The yield is still above the industry average at 5.4%.

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Dedicare's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Dedicare was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 11.0% if recent trends continue. If the dividend continues on this path, the payout ratio could be 50% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Dedicare

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of SEK2.40 in 2015 to the most recent total annual payment of SEK2.50. Dividend payments have been growing, but very slowly over the period. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Dedicare has grown earnings per share at 11% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like Dedicare's Dividend

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Dedicare has the makings of a solid income stock moving forward. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 4 warning signs for Dedicare that you should be aware of before investing. 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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