Hanza (STO:HANZA) Will Pay A Smaller Dividend Than Last Year

Hanza AB (publ)'s (STO:HANZA) dividend is being reduced from last year's payment covering the same period to SEK0.80 on the 20th of May. This means that the annual payment is 0.9% of the current stock price, which is lower than what the rest of the industry is paying.

Check out our latest analysis for Hanza

Hanza's Future Dividend Projections Appear Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Hanza's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 12%, so there isn't too much pressure on the dividend.

Hanza's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. The annual payment during the last 6 years was SEK0.25 in 2019, and the most recent fiscal year payment was SEK0.80. This implies that the company grew its distributions at a yearly rate of about 21% 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

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Hanza has been growing its earnings per share at 28% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Hanza Looks Like A Great Dividend Stock

Overall, we think that Hanza could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Hanza that investors should take into consideration. Is Hanza not quite the opportunity you were looking for? Why not check out our selection of top 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.