Prevas (STO:PREV B) Has Announced A Dividend Of SEK4.75

The board of Prevas AB (STO:PREV B) has announced that it will pay a dividend of SEK4.75 per share on the 21st of May. This means the annual payment is 4.8% of the current stock price, which is above the average for the industry.

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

Prevas' Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Prevas' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 66.3%. If the dividend continues on this path, the payout ratio could be 49% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Prevas

Prevas Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2021, the annual payment back then was SEK2.00, compared to the most recent full-year payment of SEK4.75. This implies that the company grew its distributions at a yearly rate of about 24% over that duration. Prevas has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Prevas has been growing its earnings per share at 18% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Prevas Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Taking the debate a bit further, we've identified 2 warning signs for Prevas that investors need to be conscious of moving forward. Is Prevas not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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