Lindab International (STO:LIAB) Has Announced A Dividend Of SEK2.70

The board of Lindab International AB (publ) (STO:LIAB) has announced that it will pay a dividend on the 1st of January, with investors receiving SEK2.70 per share. Based on this payment, the dividend yield on the company's stock will be 2.7%, which is an attractive boost to shareholder returns.

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Lindab International's Payment Could Potentially Have Solid Earnings Coverage

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 121% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 37%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

According to analysts, EPS should be several times higher next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 42% which is fairly sustainable.

View our latest analysis for Lindab International

Lindab International Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the annual payment back then was SEK1.10, compared to the most recent full-year payment of SEK5.40. This implies that the company grew its distributions at a yearly rate of about 17% 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.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Lindab International's EPS has declined at around 13% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Lindab International's payments, as there could be some issues with sustaining them into the future. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 4 warning signs for Lindab International that you should be aware of before investing. Is Lindab International not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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