Micro Systemation (STO:MSAB B) Has Announced A Dividend Of SEK0.50

Micro Systemation AB (publ) (STO:MSAB B) has announced that it will pay a dividend of SEK0.50 per share on the 20th of November. The dividend yield will be 3.5% based on this payment which is still above the industry average.

Check out our latest analysis for Micro Systemation

Micro Systemation's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Micro Systemation's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 37% which is fairly sustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was SEK0.10, compared to the most recent full-year payment of SEK1.50. This means that it has been growing its distributions at 31% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

There Isn't Much Room To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Micro Systemation has impressed us by growing EPS at 8.2% per year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

In Summary

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. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Micro Systemation that investors should take into consideration. Is Micro Systemation not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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