Bokusgruppen's (STO:BOKUS) Dividend Will Be SEK1.65

Bokusgruppen AB (publ) (STO:BOKUS) has announced that it will pay a dividend of SEK1.65 per share on the 13th of November. This makes the dividend yield 7.1%, which is above the industry average.

Check out our latest analysis for Bokusgruppen

Bokusgruppen's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. 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.

Earnings per share is forecast to rise by 60.7% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 88% which is a bit high but can definitely be sustainable.

Bokusgruppen Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The dividend has gone from an annual total of SEK3.00 in 2021 to the most recent total annual payment of SEK3.30. This works out to be a compound annual growth rate (CAGR) of approximately 3.2% a year over that time. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

Bokusgruppen Might Find It Hard To Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. Bokusgruppen has seen EPS rising for the last five years, at 55% per annum. Although earnings per share is up nicely Bokusgruppen is paying out 116% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

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. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing 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. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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