Catena (STO:CATE) Is Due To Pay A Dividend Of SEK4.25

The board of Catena AB (publ) (STO:CATE) has announced that it will pay a dividend on the 1st of November, with investors receiving SEK4.25 per share. Even though the dividend went up, the yield is still quite low at only 1.7%.

View our latest analysis for Catena

Catena's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Catena was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 36.2% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 54%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Catena Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was SEK2.00 in 2014, and the most recent fiscal year payment was SEK8.50. This means that it has been growing its distributions at 16% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 3.6% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, Catena has the option to increase the payout ratio to return more cash to shareholders.

We Really Like Catena's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for Catena (of which 2 can't be ignored!) you should know about. Is Catena not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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