Bilia (STO:BILI A) Will Pay A Smaller Dividend Than Last Year

Bilia AB (publ) (STO:BILI A) has announced that on 5th of May, it will be paying a dividend ofSEK1.40, which a reduction from last year's comparable dividend. This means that the annual payment will be 4.1% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Bilia

Bilia's Payment Could Potentially Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Bilia's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 156% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Looking forward, earnings per share is forecast to rise by 85.0% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 53% which would be quite comfortable going to take the dividend forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was SEK2.25 in 2015, and the most recent fiscal year payment was SEK5.60. This means that it has been growing its distributions at 9.5% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Bilia's EPS has declined at around 2.2% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. 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.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Bilia is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Bilia (1 shouldn't be ignored!) that you should be aware of before investing. 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.