Catena (STO:CATE) Will Pay A Dividend Of SEK4.25

The board of Catena AB (publ) (STO:CATE) has announced that it will pay a dividend of SEK4.25 per share on the 1st of November. Despite this raise, the dividend yield of 1.7% is only a modest boost to shareholder returns.

See our latest analysis for Catena

Catena's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Catena's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to fall by 36.3% 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 an extended history of paying stable dividends. Since 2014, the annual payment back then was SEK2.00, compared to the most recent full-year payment of SEK8.50. This means that it has been growing its distributions at 16% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 3.6% per annum over the last five years, which admittedly is a bit slow. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Catena Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Catena is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. 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. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Catena (of which 1 shouldn'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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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.

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