Catena's (STO:CATE) Upcoming Dividend Will Be Larger Than Last Year's

Catena AB (publ) (STO:CATE) has announced that it will be increasing its dividend from last year's comparable payment on the 3rd of May to SEK4.25. Even though the dividend went up, the yield is still quite low at only 1.8%.

See our latest analysis for Catena

Catena's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, Catena's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 61.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 87%, which is definitely on the higher side.

Catena Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. 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. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Catena May Find It Hard To Grow The Dividend

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. 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

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Catena (of which 1 can't be ignored!) 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.