Pandox's (STO:PNDX B) Dividend Will Be Increased To SEK4.00

Pandox AB (publ)'s (STO:PNDX B) dividend will be increasing from last year's payment of the same period to SEK4.00 on 17th of April. Even though the dividend went up, the yield is still quite low at only 2.4%.

See our latest analysis for Pandox

Pandox's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Pandox 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. Assuming the dividend continues along recent trends, we think the payout ratio will be 67%, which makes us pretty comfortable with the sustainability of the dividend.

Pandox's Dividend Has Lacked Consistency

It's comforting to see that Pandox has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 8 years was SEK3.80 in 2016, and the most recent fiscal year payment was SEK4.00. Dividend payments have been growing, but very slowly over the period. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth May Be Hard To Come By

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's not great to see that Pandox's earnings per share has fallen at approximately 6.7% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. 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 can turn into a longer term trend.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Pandox will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Pandox has 2 warning signs (and 1 which is significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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