Upsales Technology (STO:UPSALE) Is Due To Pay A Dividend Of SEK1.50

Upsales Technology AB (publ)'s (STO:UPSALE) investors are due to receive a payment of SEK1.50 per share on 15th of May. Based on this payment, the dividend yield on the company's stock will be 5.0%, which is an attractive boost to shareholder returns.

Our free stock report includes 3 warning signs investors should be aware of before investing in Upsales Technology. Read for free now.

Upsales Technology's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Over the next year, EPS is forecast to expand by 110.4%. If the dividend continues along recent trends, we estimate the payout ratio could reach 85%, which is on the higher side, but certainly still feasible.

View our latest analysis for Upsales Technology

Upsales Technology's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The annual payment during the last 3 years was SEK1.00 in 2022, and the most recent fiscal year payment was SEK1.50. This means that it has been growing its distributions at 14% per annum over that time. Upsales Technology has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth Could Be Constrained

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. We are encouraged to see that Upsales Technology has grown earnings per share at 41% per year over the past five years. EPS has been growing well, but Upsales Technology has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

Upsales Technology's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We don't think Upsales Technology is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, Upsales Technology has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about. 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.