Solid Försäkringsaktiebolag's (STO:SFAB) Dividend Will Be Increased To SEK4.50

Solid Försäkringsaktiebolag (publ) (STO:SFAB) has announced that it will be increasing its dividend from last year's comparable payment on the 3rd of May to SEK4.50. This will take the annual payment to 6.6% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Solid Försäkringsaktiebolag

Solid Försäkringsaktiebolag's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Solid Försäkringsaktiebolag was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 76% indicates it is more focused on returning cash to shareholders than growing the business.

Looking forward, earnings per share could rise by 64.4% over the next year if the trend from the last few years continues. 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

The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. 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

The company's investors will be pleased to have been receiving dividend income for some time. 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.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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. Is Solid Försäkringsaktiebolag not quite the opportunity you were looking for? Why not check out our selection of top 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.