Synsam (STO:SYNSAM) Has Announced That It Will Be Increasing Its Dividend To SEK1.80

Synsam AB (publ) (STO:SYNSAM) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of May to SEK1.80. This takes the annual payment to 3.4% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Synsam

Synsam's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. The last payment made up 86% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, earnings per share is forecast to rise by 134.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Synsam Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2022, the annual payment back then was SEK1.70, compared to the most recent full-year payment of SEK1.80. This works out to be a compound annual growth rate (CAGR) of approximately 2.9% a year over that time. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

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 75% per annum. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Synsam is not retaining those earnings to reinvest in growth.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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 probably look elsewhere for an income investment.

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. As an example, we've identified 2 warning signs for Synsam that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.