Byggmax Group (STO:BMAX) Is Increasing Its Dividend To SEK0.75

Byggmax Group AB (publ)'s (STO:BMAX) dividend will be increasing from last year's payment of the same period to SEK0.75 on 13th of May. Despite this raise, the dividend yield of 1.4% is only a modest boost to shareholder returns.

See our latest analysis for Byggmax Group

Byggmax Group's Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Byggmax Group's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 188.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was SEK2.30 in 2015, and the most recent fiscal year payment was SEK0.75. Dividend payments have fallen sharply, down 67% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Earnings per share has been sinking by 13% over the last 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. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Our Thoughts On Byggmax Group's Dividend

Overall, we always like to see the dividend being raised, but we don't think Byggmax Group will make a great income stock. 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 be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Now, if you want to look closer, it would be worth checking out our free research on Byggmax Group management tenure, salary, and performance. Is Byggmax Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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