Atrium Ljungberg's (STO:ATRLJ B) Dividend Will Be 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. Although the dividend is now higher, the yield is only 2.2%, which is below the industry average.

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

Even a low dividend yield can be attractive if it is sustained for years on end. 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.

View our latest analysis for Atrium Ljungberg

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend 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 been growing, but very slowly over the period. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Come By

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. 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.

Our Thoughts On Atrium Ljungberg's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Atrium Ljungberg has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. 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.