Synsam AB (publ) (STO:SYNSAM) will pay a dividend of SEK1.70 on the 3rd of May. This payment means that the dividend yield will be 4.1%, which is around the industry average.
Check out our latest analysis for Synsam
Synsam's Payment Has Solid Earnings Coverage
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. 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 we don't think that there are necessarily signs that the dividend might be unsustainable.
The next year is set to see EPS grow by 51.9%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 51% 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
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Synsam has been growing its earnings per share at 92% a year over the past five years. 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, 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.
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 shouldn't be ignored!) you should know about. 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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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.
