Lagercrantz Group (STO:LAGR B) Is Increasing Its Dividend To SEK1.60

Lagercrantz Group AB (publ) (STO:LAGR B) will increase its dividend from last year's comparable payment on the 5th of September to SEK1.60. The payment will take the dividend yield to 1.3%, which is in line with the average for the industry.

See our latest analysis for Lagercrantz Group

Lagercrantz Group's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, Lagercrantz Group was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 35.7%. 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.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was SEK0.361, compared to the most recent full-year payment of SEK1.60. This works out to be a compound annual growth rate (CAGR) of approximately 16% 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 see if earnings per share is growing. Lagercrantz Group has impressed us by growing EPS at 21% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

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 of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Lagercrantz Group that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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