The board of Prevas AB (STO:PREV B) has announced that it will be paying its dividend of SEK4.50 on the 19th of May, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 3.0%, providing a nice boost to shareholder returns.
Check out our latest analysis for Prevas
Prevas' Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Prevas' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, earnings per share is forecast to rise by 9.4% over the next year. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the dividend has gone from SEK0.30 total annually to SEK4.50. This implies that the company grew its distributions at a yearly rate of about 31% over that duration. 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.
The Dividend Looks Likely To Grow
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. It's encouraging to see that Prevas has been growing its earnings per share at 54% a year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.
We Really Like Prevas' Dividend
Overall, a dividend increase is always good, and we think that Prevas is a strong income stock thanks to its track record and growing earnings. 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.
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. For instance, we've picked out 1 warning sign for Prevas 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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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.
About OM:PREV B
Prevas
Provides technical consultancy services in Sweden and internationally.
Good value with reasonable growth potential.
