NP3 Fastigheter (STO:NP3) Will Pay A Dividend Of SEK1.30

The board of NP3 Fastigheter AB (publ) (STO:NP3) has announced that it will pay a dividend on the 5th of November, with investors receiving SEK1.30 per share. Although the dividend is now higher, the yield is only 2.0%, which is below the industry average.

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NP3 Fastigheter's Projected Earnings Seem Likely To Cover Future Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, NP3 Fastigheter's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 7.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for NP3 Fastigheter

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was SEK0.50 in 2015, and the most recent fiscal year payment was SEK5.20. This implies that the company grew its distributions at a yearly rate of about 26% over that duration. NP3 Fastigheter 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 Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. NP3 Fastigheter hasn't seen much change in its earnings per share over the last five years. While EPS growth is quite low, NP3 Fastigheter has the option to increase the payout ratio to return more cash to shareholders.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for NP3 Fastigheter (of which 1 can't be ignored!) you should know about. Is NP3 Fastigheter 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.