Micro Systemation (STO:MSAB B) Will Pay A Dividend Of SEK0.50

Simply Wall St · 10/14 12:52

Micro Systemation AB (publ)'s (STO:MSAB B) investors are due to receive a payment of SEK0.50 per share on 20th of November. The dividend yield will be 3.2% based on this payment which is still above the industry average.

Check out our latest analysis for Micro Systemation

Micro Systemation's Projections Indicate Future Payments May Be Unsustainable

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 275% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 57%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

EPS is set to grow by 8.2% 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 268% over the next year.

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OM:MSAB B Historic Dividend October 14th 2024

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of SEK0.10 in 2014 to the most recent total annual payment of SEK1.50. This works out to be a compound annual growth rate (CAGR) of approximately 31% a year over that time. Micro Systemation has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

There Isn't Much Room To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Micro Systemation has seen EPS rising for the last five years, at 8.2% per annum. 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 Micro Systemation's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Micro Systemation's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 3 warning signs for Micro Systemation that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.