Nordic Paper Holding (STO:NPAPER) Will Pay A Larger Dividend Than Last Year At SEK4.65

The board of Nordic Paper Holding AB (publ) (STO:NPAPER) has announced that it will be paying its dividend of SEK4.65 on the 31st of May, an increased payment from last year's comparable dividend. This makes the dividend yield 9.9%, which is above the industry average.

View our latest analysis for Nordic Paper Holding

Nordic Paper Holding's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Nordic Paper Holding's earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 28.8%. If recent patterns in the dividend continue, we could see the payout ratio reaching 77% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Nordic Paper Holding Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2021, the annual payment back then was SEK2.00, compared to the most recent full-year payment of SEK4.65. This implies that the company grew its distributions at a yearly rate of about 52% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Nordic Paper Holding Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Nordic Paper Holding has grown earnings per share at 6.5% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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 example, we've identified 3 warning signs for Nordic Paper Holding (1 can't be ignored!) that you should be aware of before investing. Is Nordic Paper Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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