Byggmax Group (STO:BMAX) Will Pay A Larger Dividend Than Last Year At kr4.00

Byggmax Group AB (publ)'s (STO:BMAX) dividend will be increasing to kr4.00 on 12th of May. This will take the annual payment from 5.6% to 5.6% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Byggmax Group

Byggmax Group's Earnings Easily Cover the Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Byggmax Group was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 44.8% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 72%, which is comfortable for the company to continue in the future.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from kr1.80 in 2012 to the most recent annual payment of kr4.00. This implies that the company grew its distributions at a yearly rate of about 8.3% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Byggmax Group might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see Byggmax Group has been growing its earnings per share at 18% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Byggmax Group Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

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. To that end, Byggmax Group has 3 warning signs (and 1 which is concerning) we think you should know about. 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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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.