Atrium Ljungberg (STO:ATRLJ B) Has Announced A Dividend Of SEK1.80

The board of Atrium Ljungberg AB (publ) (STO:ATRLJ B) has announced that it will pay a dividend on the 1st of October, with investors receiving SEK1.80 per share. Despite this raise, the dividend yield of 2.2% is only a modest boost to shareholder returns.

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Estimates Indicate Atrium Ljungberg's Could Struggle to Maintain Dividend Payments In The Future

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Atrium Ljungberg's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 114.0%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 154%, which probably can't continue without putting some pressure on the balance sheet.

Check out our latest analysis for Atrium Ljungberg

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of SEK0.66 in 2015 to the most recent total annual payment of SEK0.72. Its dividends have grown at less than 1% per annum over this time frame. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth Is Doubtful

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Atrium Ljungberg has seen earnings per share falling at 6.5% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Atrium Ljungberg's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Atrium Ljungberg (1 is a bit concerning!) that you should be aware of before investing. 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.