Meko (STO:MEKO) Is Due To Pay A Dividend Of SEK1.95

Meko AB (publ) (STO:MEKO) has announced that it will pay a dividend of SEK1.95 per share on the 20th of November. This will take the dividend yield to an attractive 3.6%, providing a nice boost to shareholder returns.

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Meko's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Meko was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 62.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Meko

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was SEK7.00, compared to the most recent full-year payment of SEK3.90. This works out to be a decline of approximately 5.7% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

We Could See Meko's Dividend Growing

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. We are encouraged to see that Meko has grown earnings per share at 7.3% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Meko that investors should know about before committing capital to this stock. Is Meko not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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