Boliden (STO:BOL) Is Reducing Its Dividend To SEK7.50

Boliden AB (publ) (STO:BOL) has announced that on 30th of April, it will be paying a dividend ofSEK7.50, which a reduction from last year's comparable dividend. This payment takes the dividend yield to 2.5%, which only provides a modest boost to overall returns.

View our latest analysis for Boliden

Boliden'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. Boliden is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 47.6% over the next year. If the dividend continues on this path, the payout ratio could be 67% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from SEK4.00 total annually to SEK7.50. This means that it has been growing its distributions at 6.5% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Boliden May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, Boliden's earnings per share has shrunk at approximately 3.3% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

The Dividend Could Prove To Be Unreliable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While Boliden is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Boliden that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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