Getinge's (STO:GETI B) Upcoming Dividend Will Be Larger Than Last Year's

Getinge AB (publ)'s (STO:GETI B) dividend will be increasing from last year's payment of the same period to SEK4.60 on 29th of April. This takes the annual payment to 2.1% of the current stock price, which is about average for the industry.

Getinge's Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Getinge's dividend made up quite a large proportion of earnings but only 38% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 146.9% over the next year. 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.

See 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 implies that the company grew its distributions at a yearly rate of about 5.1% over that duration. 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.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Getinge has seen EPS rising for the last five years, at 6.0% per annum. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Getinge's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've picked out 3 warning signs for Getinge 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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