Ependion (STO:EPEN) Is Increasing Its Dividend To SEK1.25

The board of Ependion AB (STO:EPEN) has announced that it will be paying its dividend of SEK1.25 on the 20th of May, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 0.9%, which is below the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Ependion's stock price has increased by 42% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Ependion's Future Dividend Projections Appear Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Ependion was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 107.3% over the next year. If the dividend continues on this path, the payout ratio could be 10% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Ependion

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The most recent annual payment of SEK1.25 is about the same as the annual payment 10 years ago. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

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. We are encouraged to see that Ependion has grown earnings per share at 19% per year over the past five years. Ependion definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Ependion's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 3 Ependion analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Ependion not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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