Torslanda Property Investment (STO:TORSAB) Is Due To Pay A Dividend Of kr0.22

Torslanda Property Investment AB (publ) (STO:TORSAB) has announced that it will pay a dividend of kr0.22 per share on the 13th of January. Based on this payment, the dividend yield on the company's stock will be 4.4%, which is an attractive boost to shareholder returns.

View our latest analysis for Torslanda Property Investment

Torslanda Property Investment Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Torslanda Property Investment's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

EPS is set to fall by 18.0% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 347%, which could put the dividend under pressure if earnings don't start to improve.

Torslanda Property Investment Doesn't Have A Long Payment History

Torslanda Property Investment's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from kr0.80 in 2014 to the most recent annual payment of kr0.88. This implies that the company grew its distributions at a yearly rate of about 1.4% over that duration. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Torslanda Property Investment's earnings per share has shrunk at 18% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Torslanda Property Investment's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Torslanda Property Investment's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Torslanda Property Investment 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Torslanda Property Investment has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about. We have also put together a list of global stocks with a solid dividend.

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.

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