Meko's (STO:MEKO) Dividend Will Be SEK1.95

The board of 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 3.5%, providing a nice boost to shareholder returns.

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Meko's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Meko's earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 62.6%. 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.

Check out our latest analysis for Meko

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from SEK7.00 total annually to 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

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. It's encouraging to see that Meko has been growing its earnings per share at 7.3% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Meko 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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