Clas Ohlson (STO:CLAS B) Has Announced That Its Dividend Will Be Reduced To SEK1.50

Clas Ohlson AB (publ)'s (STO:CLAS B) dividend is being reduced from last year's payment covering the same period to SEK1.50 on the 15th of September. This means that the dividend yield is 1.9%, which is a bit low when comparing to other companies in the industry.

View our latest analysis for Clas Ohlson

Clas Ohlson Is Paying Out More Than It Is Earning

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Clas Ohlson's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to fall by 12.8% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 332%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the dividend has gone from SEK4.25 total annually to SEK1.50. Doing the maths, this is a decline of about 9.9% per year. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Clas Ohlson's earnings per share has shrunk at 13% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Our Thoughts On Clas Ohlson's Dividend

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. 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. We don't think Clas Ohlson is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Clas Ohlson that you should be aware of before investing. 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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