Stille (STO:STIL) Has Announced That Its Dividend Will Be Reduced To kr1.00

Stille AB (STO:STIL) has announced it will be reducing its dividend payable on the 12th of May to kr1.00. This payment takes the dividend yield to 0.8%, which only provides a modest boost to overall returns.

View our latest analysis for Stille

Stille's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Stille was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 93.1%. If the dividend continues on this path, the payout ratio could be 18% by next year, which we think can be pretty sustainable going forward.

Stille's Dividend Has Lacked Consistency

It's comforting to see that Stille has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The payments haven't really changed that much since 8 years ago. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Stille May Find It Hard To Grow The Dividend

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. Unfortunately, Stille's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Stille's Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Stille (of which 1 can't be ignored!) you should know about. Is Stille not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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