Bahnhof (STO:BAHN B) Is Paying Out A Larger Dividend Than Last Year

The board of Bahnhof AB (publ) (STO:BAHN B) has announced that it will be paying its dividend of SEK2.00 on the 21st of May, an increased payment from last year's comparable dividend. This takes the annual payment to 5.0% of the current stock price, which is about average for the industry.

Check out our latest analysis for Bahnhof

Bahnhof Doesn't Earn Enough To Cover Its Payments

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Bahnhof's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

EPS is set to grow by 16.9% over the next year if recent trends continue. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 102% over the next year.

Bahnhof Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of SEK0.15 in 2014 to the most recent total annual payment of SEK2.00. This implies that the company grew its distributions at a yearly rate of about 30% over that duration. 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.

Bahnhof Might Find It Hard To Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Bahnhof has been growing its earnings per share at 17% a year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

Our Thoughts On Bahnhof's Dividend

Overall, we always like to see the dividend being raised, but we don't think Bahnhof will make a great income stock. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Bahnhof that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.