Lagercrantz Group (STO:LAGR B) Has Announced That It Will Be Increasing Its Dividend To SEK2.20

The board of Lagercrantz Group AB (publ) (STO:LAGR B) has announced that it will be paying its dividend of SEK2.20 on the 2nd of September, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.0%, which is below the industry average.

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Lagercrantz Group'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. The last dividend was quite easily covered by Lagercrantz Group's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 40.1%. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Lagercrantz Group

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was SEK0.444, compared to the most recent full-year payment of SEK2.20. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Lagercrantz Group has been growing its earnings per share at 22% a year over the past five years. Lagercrantz Group is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like Lagercrantz Group's Dividend

Overall, a dividend increase is always good, and we think that Lagercrantz Group is a strong income stock thanks to its track record and growing earnings. 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. For example, we've picked out 1 warning sign for Lagercrantz Group that investors should know about before committing capital to this stock. 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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