Solid Försäkringsaktiebolag (STO:SFAB) Will Pay A Larger Dividend Than Last Year At SEK4.50

Solid Försäkringsaktiebolag (publ) (STO:SFAB) will increase its dividend from last year's comparable payment on the 3rd of May to SEK4.50. This will take the annual payment to 6.7% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Solid Försäkringsaktiebolag

Solid Försäkringsaktiebolag's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Solid Försäkringsaktiebolag was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Over the next year, EPS could expand by 64.4% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% by next year, which is in a pretty sustainable range.

Solid Försäkringsaktiebolag Is Still Building Its Track Record

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Solid Försäkringsaktiebolag has grown earnings per share at 64% per year over the past five years. Solid Försäkringsaktiebolag is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Our Thoughts On Solid Försäkringsaktiebolag's Dividend

Overall, we always like to see the dividend being raised, but we don't think Solid Försäkringsaktiebolag will make a great income stock. While Solid Försäkringsaktiebolag is earning enough to cover the dividend, we are generally unimpressed with its future prospects. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Solid Försäkringsaktiebolag 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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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.