Generic Sweden's (STO:GENI) Dividend Will Be Increased To SEK1.60

Generic Sweden AB (STO:GENI) will increase its dividend from last year's comparable payment on the 22nd of May to SEK1.60. This makes the dividend yield about the same as the industry average at 2.8%.

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Generic Sweden's Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Generic Sweden's was paying out quite a large proportion of earnings and 90% 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 61.5%. 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 annual payment during the last 9 years was SEK0.30 in 2016, and the most recent fiscal year payment was SEK1.60. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend 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

Overall, we always like to see the dividend being raised, but we don't think Generic Sweden will make a great income stock. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Generic Sweden has 2 warning signs (and 1 which can't be ignored) we think you should know about. Is Generic Sweden 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.