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

Atrium Ljungberg AB (publ) (STO:ATRLJ B) will pay a dividend of SEK1.80 on the 1st of October. This takes the annual payment to 2.2% of the current stock price, which unfortunately is below what the industry is paying.

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

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Atrium Ljungberg was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

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. Since 2015, the dividend has gone from SEK0.66 total annually to SEK0.72. Dividend payments have grown at less than 1% a year over this period. 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. Over the past five years, it looks as though Atrium Ljungberg's EPS has declined at around 6.5% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. 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 payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

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. To that end, Atrium Ljungberg has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Is Atrium Ljungberg not quite the opportunity you were looking for? Why not check out our selection of top 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.