Telefonaktiebolaget LM Ericsson (STO:ERIC B) Has Announced A Dividend Of SEK1.35

Telefonaktiebolaget LM Ericsson (publ)'s (STO:ERIC B) investors are due to receive a payment of SEK1.35 per share on 10th of April. The dividend yield will be 4.7% based on this payment which is still above the industry average.

See our latest analysis for Telefonaktiebolaget LM Ericsson

Telefonaktiebolaget LM Ericsson's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Telefonaktiebolaget LM Ericsson isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. These payout levels would generally be quite difficult to keep up.

According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 14%, which makes us pretty comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was SEK3.00, compared to the most recent full-year payment of SEK2.70. Doing the maths, this is a decline of about 1.0% per year. A company that decreases its dividend over time generally isn't what we are looking for.

We Could See Telefonaktiebolaget LM Ericsson's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Telefonaktiebolaget LM Ericsson has grown earnings per share at 7.7% per year over the past five years. Unprofitable companies aren't normally our pick for a dividend stock, but we like the growth that we have been seeing. Assuming the company can post positive net income numbers soon, it could has the potential to be a decent dividend payer.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.

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. For instance, we've picked out 1 warning sign for Telefonaktiebolaget LM Ericsson that investors should take into consideration. Is Telefonaktiebolaget LM Ericsson not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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