Eastnine's (STO:EAST) Shareholders Will Receive A Bigger Dividend Than Last Year

Eastnine AB (publ) (STO:EAST) will increase its dividend from last year's comparable payment on the 25th of August to €0.85. Even though the dividend went up, the yield is still quite low at only 3.1%.

View our latest analysis for Eastnine

Eastnine Is Paying Out More Than It Is Earning

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Eastnine was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next 12 months is set to see EPS grow by 0.9%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

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 makes us cautious about the consistency of the dividend over a full economic cycle. Since 2016, the annual payment back then was €0.09, compared to the most recent full-year payment of €0.285. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Eastnine hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Eastnine's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Eastnine has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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