Awardit (STO:AWRD) Is Paying Out A Larger Dividend Than Last Year

The board of Awardit AB (publ) (STO:AWRD) has announced that it will be paying its dividend of SEK2.30 on the 23rd of May, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 2.4%, which is below the industry average.

View our latest analysis for Awardit

Awardit's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, the company was paying out 372% of what it was earning and 76% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

Awardit's Dividend Has Lacked Consistency

Looking back, Awardit's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the annual payment back then was SEK2.00, compared to the most recent full-year payment of SEK2.30. This works out to be a compound annual growth rate (CAGR) of approximately 2.4% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Awardit's EPS has fallen by approximately 28% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Awardit's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Awardit's payments are rock solid. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Awardit is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 5 warning signs for Awardit 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.