Bokusgruppen (STO:BOKUS) Has Announced That It Will Be Increasing Its Dividend To SEK1.80

Bokusgruppen AB (publ) (STO:BOKUS) will increase its dividend from last year's comparable payment on the 14th of May to SEK1.80. This will take the dividend yield to an attractive 6.8%, providing a nice boost to shareholder returns.

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Bokusgruppen's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Bokusgruppen'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.

Over the next year, EPS is forecast to expand by 65.6%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 95% - on the higher side, but we wouldn't necessarily say this is unsustainable.

View our latest analysis for Bokusgruppen

Bokusgruppen Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2022, the dividend has gone from SEK3.00 total annually to SEK3.60. This means that it has been growing its distributions at 6.3% per annum over that time. Bokusgruppen has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

Bokusgruppen's Dividend Might Lack Growth

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Bokusgruppen has impressed us by growing EPS at 52% per year over the past five years. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.

Our Thoughts On Bokusgruppen's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Bokusgruppen's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Bokusgruppen that investors need to be conscious of moving forward. Is Bokusgruppen not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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