Eastnine (STO:EAST) Is Increasing Its Dividend To €0.85

Eastnine AB (publ) (STO:EAST) will increase its dividend from last year's comparable payment on the 26th of January to €0.85. Even though the dividend went up, the yield is still quite low at only 2.1%.

Check out our latest analysis for Eastnine

Eastnine's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. While Eastnine is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. This gives us some comfort about the level of the dividend payments.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 15%, so there isn't too much pressure on the dividend.

Eastnine's Dividend Has Lacked Consistency

It's comforting to see that Eastnine has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2015, the annual payment back then was €0.09, compared to the most recent full-year payment of €0.285. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Eastnine has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Company Could Face Some Challenges Growing The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Eastnine has impressed us by growing EPS at 20% per year over the past five years. It's not great that the company is not turning a profit, but the decent growth in recent years is certainly a positive sign. Assuming the company can post positive net income numbers soon, it could has the potential to be a decent 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. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Eastnine is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Eastnine that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.