Synsam AB (publ)'s (STO:SYNSAM) investors are due to receive a payment of SEK1.70 per share on 3rd of May. This payment means that the dividend yield will be 3.9%, which is around the industry average.
View our latest analysis for Synsam
Synsam's Payment Has Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Synsam's was paying out quite a large proportion of earnings and 82% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.
Looking forward, earnings per share is forecast to rise by 72.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
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
The company's investors will be pleased to have been receiving dividend income for some time. Synsam has impressed us by growing EPS at 92% per year over the past five years. However, Synsam isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. 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.
About OM:SYNSAM
Undervalued with high growth potential.
