Hanza's (STO:HANZA) Dividend Is Being Reduced To SEK0.80

Hanza AB (publ) (STO:HANZA) is reducing its dividend from last year's comparable payment to SEK0.80 on the 20th of May. However, the dividend yield of 1.0% still remains in a typical range for the industry.

We've discovered 3 warning signs about Hanza. View them for free.

Hanza's Projected Earnings Seem Likely To Cover Future Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Hanza 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.

According to analysts, EPS should be several times higher next year. If the dividend extends its recent trend, estimates say the dividend could reach 13%, which we would be comfortable to see continuing.

Check out our latest analysis for Hanza

Hanza's Dividend Has Lacked Consistency

It's comforting to see that Hanza has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2019, the annual payment back then was SEK0.25, compared to the most recent full-year payment of SEK0.80. This works out to be a compound annual growth rate (CAGR) of approximately 21% 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 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 32% 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.

We Really Like Hanza's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Hanza does. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Hanza (of which 1 is significant!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.