Rederiaktiebolaget Gotland (STO:GOTL A) Is Increasing Its Dividend To SEK20.30

Rederiaktiebolaget Gotland (publ) (STO:GOTL A) will increase its dividend from last year's comparable payment on the 17th of June to SEK20.30. Despite this raise, the dividend yield of 1.0% is only a modest boost to shareholder returns.

We've discovered 1 warning sign about Rederiaktiebolaget Gotland. View them for free.

Rederiaktiebolaget Gotland's Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Rederiaktiebolaget Gotland is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS could expand by 3.9% if recent trends continue. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Rederiaktiebolaget Gotland

Rederiaktiebolaget Gotland Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The annual payment during the last 3 years was SEK8.20 in 2022, and the most recent fiscal year payment was SEK20.30. This means that it has been growing its distributions at 35% per annum over that time. Rederiaktiebolaget Gotland has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Rederiaktiebolaget Gotland has only grown its earnings per share at 3.9% per annum over the past five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Our Thoughts On Rederiaktiebolaget Gotland's Dividend

Overall, we always like to see the dividend being raised, but we don't think Rederiaktiebolaget Gotland will make a great income stock. While Rederiaktiebolaget Gotland is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Rederiaktiebolaget Gotland that investors should take into consideration. 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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