Wihlborgs Fastigheter (STO:WIHL) Has Announced That It Will Be Increasing Its Dividend To SEK3.15

Wihlborgs Fastigheter AB (publ) (STO:WIHL) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of May to SEK3.15. This takes the annual payment to 3.4% of the current stock price, which is about average for the industry.

See our latest analysis for Wihlborgs Fastigheter

Wihlborgs Fastigheter Is Paying Out More Than It Is Earning

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. While Wihlborgs Fastigheter 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. 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.

Earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we could see the payout ratio reach 3,446%, which is on the unsustainable side.

Wihlborgs Fastigheter Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of SEK1.00 in 2014 to the most recent total annual payment of SEK3.15. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Come By

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. In the last five years, Wihlborgs Fastigheter's earnings per share has shrunk at approximately 9.4% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Wihlborgs Fastigheter's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Wihlborgs Fastigheter's payments are rock solid. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think Wihlborgs Fastigheter is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Wihlborgs Fastigheter (1 can't be ignored!) that you should be aware of before investing. Is Wihlborgs 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.