Generic Sweden (STO:GENI) Is Increasing Its Dividend To SEK1.60

Generic Sweden AB's (STO:GENI) dividend will be increasing from last year's payment of the same period to SEK1.60 on 22nd of May. This takes the annual payment to 2.6% of the current stock price, which is about average for the industry.

Our free stock report includes 2 warning signs investors should be aware of before investing in Generic Sweden. Read for free now.

Generic Sweden's Projected Earnings Seem Likely To Cover Future Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last dividend made up a very large portion of earnings and also represented 90% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Over the next year, EPS is forecast to expand by 61.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 55% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Generic Sweden

Generic Sweden Is Still Building Its Track Record

Generic Sweden's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of SEK0.30 in 2016 to the most recent total annual payment of SEK1.60. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Generic Sweden has impressed us by growing EPS at 25% per year over the past five years. However, Generic Sweden isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

Our Thoughts On Generic Sweden's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Generic Sweden's payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Generic Sweden has been making. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Generic Sweden (of which 1 is a bit unpleasant!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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