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

Nyfosa AB (publ) (STO:NYF) has announced that it will be increasing its dividend from last year's comparable payment on the 4th of October to SEK1.00. This takes the dividend yield to 6.1%, which shareholders will be pleased with.

Check out our latest analysis for Nyfosa

Nyfosa's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Nyfosa is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend extends its recent trend, estimates say the dividend could reach 21%, which we would be comfortable to see continuing.

Nyfosa Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of SEK3.00 in 2021 to the most recent total annual payment of SEK4.00. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. Nyfosa has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Nyfosa hasn't seen much change in its earnings per share over the last five years. Nyfosa isn't actually turning a profit, which makes it much harder for us to see how they can grow dividends.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Nyfosa's payments are rock solid. 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 be a touch cautious of relying on this stock primarily for the dividend income.

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. To that end, Nyfosa has 2 warning signs (and 1 which is a bit unpleasant) we think 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.