Nodebis Applications (NGM:NODE) Has Announced That It Will Be Increasing Its Dividend To SEK1.50

Nodebis Applications AB (publ)'s (NGM:NODE) periodic dividend will be increasing on the 27th of May to SEK1.50, with investors receiving 50% more than last year's SEK1.00. This makes the dividend yield 3.9%, which is above the industry average.

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Nodebis Applications' Projections Indicate Future Payments May Be Unsustainable

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the dividend made up 85% of cash flows, but a higher proportion of net income. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

EPS is set to grow by 88.2% over the next year if recent trends continue. If the dividend continues on its recent course, the payout ratio in 12 months could be 199%, which is a bit high and could start applying pressure to the balance sheet.

See our latest analysis for Nodebis Applications

Nodebis Applications Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 3 years was SEK0.80 in 2023, and the most recent fiscal year payment was SEK1.00. This means that it has been growing its distributions at 7.7% per annum over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Nodebis Applications to be a consistent dividend paying stock.

Dividend Growth Could Be Constrained

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Nodebis Applications has been growing its earnings per share at 88% a year over the past five years. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.

An additional note is that the company has been raising capital by issuing stock equal to 27% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Nodebis Applications' Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Nodebis Applications will make a great income stock. 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. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 5 warning signs for Nodebis Applications (of which 1 is a bit concerning!) you should know about. Is Nodebis Applications 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.