Bahnhof's (NGM:BAHN B) Shareholders Will Receive A Bigger Dividend Than Last Year

Bahnhof AB (publ) (NGM:BAHN B) will increase its dividend on the 17th of May to kr1.00. Although the dividend is now higher, the yield is only 2.8%, which is below the industry average.

View our latest analysis for Bahnhof

Bahnhof's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. The last payment made up 73% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS could expand by 15.5% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 74%, which is in the range that makes us comfortable with the sustainability of the dividend.

Bahnhof Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was kr0.045 in 2012, and the most recent fiscal year payment was kr1.00. This works out to be a compound annual growth rate (CAGR) of approximately 36% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Bahnhof has been growing its earnings per share at 16% a year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

We Really Like Bahnhof's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Now, if you want to look closer, it would be worth checking out our free research on Bahnhof management tenure, salary, and performance. 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.