Eastnine (STO:EAST) Has Announced A Dividend Of €0.85

The board of Eastnine AB (publ) (STO:EAST) has announced that it will pay a dividend on the 26th of January, with investors receiving €0.85 per share. Despite this raise, the dividend yield of 2.0% is only a modest boost to shareholder returns.

See our latest analysis for Eastnine

Eastnine's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Even though Eastnine isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 17%, which makes us pretty comfortable with the sustainability of the dividend.

Eastnine's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 8 years was €0.09 in 2015, and the most recent fiscal year payment was €0.285. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Company Could Face Some Challenges Growing The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Eastnine has grown earnings per share at 20% per year over the past five years. Even though the company isn't making a profit, strong earnings growth could turn that around in the near future. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid dividend payer.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Eastnine's payments are rock solid. 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 be a touch cautious of relying on this stock primarily for the dividend income.

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. For instance, we've picked out 1 warning sign for Eastnine that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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