Nordic Paper Holding (STO:NPAPER) Is Paying Out Less In Dividends Than Last Year

Nordic Paper Holding AB (publ)'s (STO:NPAPER) dividend is being reduced from last year's payment covering the same period to SEK4.00 on the 30th of May. This means the annual payment is 7.4% of the current stock price, which is above the average for the industry.

View our latest analysis for Nordic Paper Holding

Nordic Paper Holding's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Nordic Paper Holding was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. 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 is forecast to expand by 20.0%. If the dividend continues along recent trends, we estimate the payout ratio could reach 75%, which is on the higher side, but certainly still feasible.

Nordic Paper Holding Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The dividend has gone from an annual total of SEK2.00 in 2021 to the most recent total annual payment of SEK4.00. This means that it has been growing its distributions at 26% per annum over that time. Nordic Paper Holding has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Nordic Paper Holding May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Unfortunately, Nordic Paper Holding's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Nordic Paper Holding's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While Nordic Paper Holding is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Nordic Paper Holding is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Nordic Paper Holding that investors should take into consideration. 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.