Fabege (STO:FABG) Is Due To Pay A Dividend Of SEK0.45

Fabege AB (publ) (STO:FABG) will pay a dividend of SEK0.45 on the 13th of January. This payment takes the dividend yield to 1.8%, which only provides a modest boost to overall returns.

See our latest analysis for Fabege

Estimates Indicate Fabege's Dividend Coverage Likely To Improve

Even a low dividend yield can be attractive if it is sustained for years on end. Even though Fabege isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Analysts expect a massive rise in earnings per share in the next year. If the dividend extends its recent trend, estimates say the dividend could reach 2.4%, which we would be comfortable to see continuing.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of SEK1.50 in 2014 to the most recent total annual payment of SEK1.80. This works out to be a compound annual growth rate (CAGR) of approximately 1.8% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Fabege's EPS has declined at around 45% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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. We don't think Fabege 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Fabege you should be aware of, and 1 of them can't be ignored. Is Fabege 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.