CombinedX (STO:CX) Is Reducing Its Dividend To SEK1.40

CombinedX AB (publ) (STO:CX) has announced that on 15th of May, it will be paying a dividend ofSEK1.40, which a reduction from last year's comparable dividend. The dividend yield of 3.9% is still a nice boost to shareholder returns, despite the cut.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

CombinedX's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, CombinedX's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 14.4%. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for CombinedX

CombinedX's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The dividend has gone from an annual total of SEK1.50 in 2022 to the most recent total annual payment of SEK1.40. Doing the maths, this is a decline of about 2.3% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that CombinedX has been growing its earnings per share at 39% a year over the past five years. CombinedX is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

CombinedX Looks Like A Great Dividend Stock

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that CombinedX has the makings of a solid income stock moving forward. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 3 warning signs for CombinedX that investors should take into consideration. Is CombinedX not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.