Getinge (STO:GETI B) Is Increasing Its Dividend To SEK4.60

Getinge AB (publ) (STO:GETI B) has announced that it will be increasing its dividend from last year's comparable payment on the 29th of April to SEK4.60. Based on this payment, the dividend yield for the company will be 2.6%, which is fairly typical for the industry.

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Getinge's Projected Earnings Seem Likely To Cover Future Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before this announcement, Getinge was paying out 76% of earnings, but a comparatively small 38% of free cash flows. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 146.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

View our latest analysis for Getinge

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 SEK2.80 total annually to SEK4.60. This works out to be a compound annual growth rate (CAGR) of approximately 5.1% a year 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.

Getinge Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Getinge has grown earnings per share at 6.0% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Getinge will make a great income stock. 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. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 3 warning signs for Getinge that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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