Nyfosa's (STO:NYF) Dividend Will Be Increased To SEK1.00

Nyfosa AB (publ)'s (STO:NYF) dividend will be increasing from last year's payment of the same period to SEK1.00 on 4th of October. This takes the dividend yield to 6.4%, which shareholders will be pleased with.

Check out our latest analysis for Nyfosa

Nyfosa's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even though Nyfosa isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 23%, which makes us pretty comfortable with the sustainability of the dividend.

Nyfosa Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2021, the annual payment back then was SEK3.00, compared to the most recent full-year payment of SEK4.00. This means that it has been growing its distributions at 15% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Nyfosa May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. However, Nyfosa's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Nyfosa isn't actually turning a profit, which makes it much harder for us to see how they can grow dividends.

Our Thoughts On Nyfosa's Dividend

Overall, we always like to see the dividend being raised, but we don't think Nyfosa will make a great income stock. 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 would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Nyfosa (of which 1 shouldn't be ignored!) you should know about. 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.