Hanza's (STO:HANZA) Dividend Will Be Reduced To SEK0.80

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. However, the dividend yield of 1.3% still remains in a typical range for the industry.

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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.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 13%, which makes us pretty comfortable with the sustainability of the dividend.

Check out our latest analysis for Hanza

Hanza's Dividend Has Lacked Consistency

Hanza has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency 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 implies that the company grew its distributions at a yearly rate of about 21% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Hanza has impressed us by growing EPS at 27% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

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. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Hanza that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.