Stock Analysis

Clas Ohlson's (STO:CLAS B) Dividend Will Be Reduced To SEK1.50

OM:CLAS B
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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 payment takes the dividend yield to 1.9%, which only provides a modest boost to overall returns.

See our latest analysis for Clas Ohlson

Clas Ohlson Doesn't Earn Enough To Cover Its Payments

Even a low dividend yield can be attractive if it is sustained for years on end. The last dividend was quite easily covered by Clas Ohlson's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, EPS could fall by 12.8% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 332%, which could put the dividend under pressure if earnings don't start to improve.

historic-dividend
OM:CLAS B Historic Dividend July 13th 2023

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was SEK4.25 in 2013, and the most recent fiscal year payment was SEK1.50. The dividend has shrunk at around 9.9% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Over the past five years, it looks as though Clas Ohlson's EPS has declined at around 13% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Clas Ohlson that investors should take into consideration. Is Clas Ohlson 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.