Bilia (STO:BILI A) Will Pay A Larger Dividend Than Last Year At SEK2.20

The board of Bilia AB (publ) (STO:BILI A) has announced that it will be paying its dividend of SEK2.20 on the 14th of July, an increased payment from last year's comparable dividend. This will take the annual payment to 7.9% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Bilia

Bilia's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Bilia's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share is forecast to rise by 6.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 65%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of SEK2.38 in 2013 to the most recent total annual payment of SEK8.80. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Bilia has been growing its earnings per share at 17% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Bilia's Dividend

Overall, we always like to see the dividend being raised, but we don't think Bilia will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Bilia (of which 2 are a bit unpleasant!) 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.