Berner Industrier (STO:BERNER B) Is Increasing Its Dividend To SEK0.95

The board of Berner Industrier AB (STO:BERNER B) has announced that it will be paying its dividend of SEK0.95 on the 7th of May, an increased payment from last year's comparable dividend. This makes the dividend yield 2.4%, which is above the industry average.

View our latest analysis for Berner Industrier

Berner Industrier's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Berner Industrier's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 71.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was SEK0.25, compared to the most recent full-year payment of SEK0.95. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year 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.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Berner Industrier's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Berner Industrier's Dividend

Overall, we always like to see the dividend being raised, but we don't think Berner Industrier will make a great income stock. 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 probably look elsewhere for an income investment.

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 2 warning signs for Berner Industrier that investors should take into consideration. Is Berner Industrier not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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