Atrium Ljungberg (STO:ATRLJ B) Is Due To Pay A Dividend Of SEK1.80

Atrium Ljungberg AB (publ) (STO:ATRLJ B) has announced that it will pay a dividend of SEK1.80 per share on the 1st of October. Although the dividend is now higher, the yield is only 2.3%, which is below the industry average.

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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. 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.

The next 12 months is set to see EPS grow by 114.0%. If the dividend continues on its recent course, the payout ratio in 12 months could be 154%, which is a bit high and could start applying pressure to 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 annual payment back then was SEK0.66, compared to the most recent full-year payment of SEK0.72. Dividend payments have been growing, but very slowly over the period. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth May Be Hard To Come By

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. It's not great to see that Atrium Ljungberg's earnings per share has fallen at approximately 6.5% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Atrium Ljungberg will make a great income stock. 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. This company is not in the top tier of income providing stocks.

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. To that end, Atrium Ljungberg has 2 warning signs (and 1 which is significant) 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.