Bahnhof's (STO:BAHN B) Dividend Will Be Increased To SEK2.00

Bahnhof AB (publ) (STO:BAHN B) will increase its dividend from last year's comparable payment on the 21st of May to SEK2.00. The payment will take the dividend yield to 4.4%, which is in line with the average for the industry.

Check out our latest analysis for Bahnhof

Bahnhof Is Paying Out More Than It Is Earning

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, the company was paying out 100% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 54%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Earnings per share could rise by 16.9% over the next year if things go the same way as they have for the last few years. If the dividend continues on its recent course, the payout ratio in 12 months could be 102%, which is a bit high and could start applying pressure to the balance sheet.

Bahnhof Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from SEK0.275 total annually to SEK2.00. This means that it has been growing its distributions at 22% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Bahnhof Might Find It Hard To Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Bahnhof has been growing its earnings per share at 17% a year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

Our Thoughts On Bahnhof's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Bahnhof's payments are rock solid. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. Overall, we don't think this company has the makings of a good income stock.

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. Taking the debate a bit further, we've identified 1 warning sign for Bahnhof that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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