Wallenstam's (STO:WALL B) Dividend Will Be SEK0.30

Wallenstam AB (publ) (STO:WALL B) has announced that it will pay a dividend of SEK0.30 per share on the 6th of November. The dividend yield is 1.5% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Wallenstam

Wallenstam Is Paying Out More Than It Is Earning

If it is predictable over a long period, even low dividend yields can be attractive. While Wallenstam is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. This gives us some comfort about the level of the dividend payments.

EPS is forecast to rise very quickly over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach 264%, which is unsustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was SEK0.293, compared to the most recent full-year payment of SEK0.60. This implies that the company grew its distributions at a yearly rate of about 7.4% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Wallenstam might have put its house in order since then, but we remain cautious.

We Could See Wallenstam's Dividend Growing

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. We are encouraged to see that Wallenstam has grown earnings per share at 5.4% per year over the past five years. Even though the company isn't making a profit, strong earnings growth could turn that around in the near future. All is not lost, but the future of the dividend definitely rests upon the company's ability to become profitable soon.

Our Thoughts On Wallenstam's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Wallenstam'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. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Wallenstam that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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