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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Bonäsudden Holding AB (publ) (STO:BONAS) is about to trade ex-dividend in the next 2 days. You can purchase shares before the 27th of September in order to receive the dividend, which the company will pay on the 3rd of October.
Bonäsudden Holding's next dividend payment will be kr1.9 per share, and in the last 12 months, the company paid a total of kr7.6 per share. Looking at the last 12 months of distributions, Bonäsudden Holding has a trailing yield of approximately 4.6% on its current stock price of SEK167. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for Bonäsudden Holding
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Bonäsudden Holding paying out a modest 36% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 87% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see how much of its profit Bonäsudden Holding paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Bonäsudden Holding has grown its earnings rapidly, up 24% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the Bonäsudden Holding dividends are largely the same as they were three years ago.
To Sum It Up
Should investors buy Bonäsudden Holding for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Bonäsudden Holding paid out less than half its earnings and a bit over half its free cash flow. Bonäsudden Holding looks solid on this analysis overall, and we'd definitely consider investigating it more closely.