The board of Synsam AB (publ) (STO:SYNSAM) has announced that it will pay a dividend on the 3rd of May, with investors receiving SEK1.70 per share. This payment means that the dividend yield will be 4.3%, which is around the industry average.
View our latest analysis for Synsam
Synsam's Earnings Easily Cover The Distributions
Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Synsam was paying out 78% of earnings and more than 75% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.
The next year is set to see EPS grow by 72.8%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 45% which brings it into quite a comfortable range.
Synsam Is Still Building Its Track Record
It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.
Synsam Might Find It Hard To Grow Its Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Synsam has seen EPS rising for the last five years, at 92% per annum. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Synsam hasn't been doing.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Strong earnings growth means Synsam has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. This company is not in the top tier of income providing stocks.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Synsam (of which 1 is a bit concerning!) you should know about. Is Synsam 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.
About OM:SYNSAM
Undervalued with high growth potential.
