Hufvudstaden (STO:HUFV A) Has Announced A Dividend Of SEK2.70

Hufvudstaden AB (publ) (STO:HUFV A) has announced that it will pay a dividend of SEK2.70 per share on the 28th of March. This means the annual payment will be 2.2% of the current stock price, which is lower than the industry average.

See our latest analysis for Hufvudstaden

Hufvudstaden's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Even though Hufvudstaden 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.

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 7.1%, 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. Since 2014, the annual payment back then was SEK2.60, compared to the most recent full-year payment of SEK2.70. Dividend payments have grown at less than 1% a year over this period. 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.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Hufvudstaden's EPS has fallen by approximately 41% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Hufvudstaden's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Hufvudstaden's payments, as there could be some issues with sustaining them into the future. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Hufvudstaden that investors should know about before committing capital to this stock. Is Hufvudstaden 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.