Micro Systemation (STO:MSAB B) Has Affirmed Its Dividend Of SEK0.50

Micro Systemation AB (publ) (STO:MSAB B) will pay a dividend of SEK0.50 on the 19th of November. This means the annual payment is 2.2% of the current stock price, which is above the average for the industry.

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Micro Systemation'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, Micro Systemation's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 811% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Over the next year, EPS is forecast to expand by 96.2%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 45% which brings it into quite a comfortable range.

See our latest analysis for Micro Systemation

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was SEK1.00 in 2015, and the most recent fiscal year payment was SEK1.50. This means that it has been growing its distributions at 4.1% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

We Could See Micro Systemation's Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Micro Systemation has impressed us by growing EPS at 6.5% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Micro Systemation's payments, as there could be some issues with sustaining them into the future. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 1 warning sign for Micro Systemation that investors should take into consideration. 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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