The Board of Systemair AB (publ) (STO:SYSR) has announced that it will pay its dividend of SEK 1.20 on September 5. This is a higher payment than last year’s comparable dividend. This makes the annual payment 1.6% of the current share price, which is about in line with the industry average.

Check out our latest analysis for Systemair

Systemair’s dividend is well covered by earnings

We want a dividend that remains consistent over the long term, so it’s important to check whether it’s sustainable. However, Systemair’s profits easily cover the dividend, meaning that the majority of profits are retained to grow the business.

Next year, EPS is expected to grow by 50.1%. If the dividend follows recent trends, we estimate the payout ratio to be 29%, which is within the range where we can assume the dividend is sustainable.

Dividend volatility

The company’s dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment was SEK 0.375 then, compared to the last full-year payment of SEK 1.20. This means that the company has increased its payouts by about 12% annually during this period. It is encouraging to see strong growth in dividend payments, but cuts are worrying as they could be a sign that the payout policy is too ambitious.

The dividend is likely to increase

With a relatively unstable dividend, it is even more important to assess whether earnings per share are growing, which could indicate a future dividend increase. Systemair has seen earnings per share grow by 15% per year over the past five years. An increase in earnings per share is a good sign for the dividend, as is the low payout ratio the company currently reports.

Systemair looks like a great dividend stock

Overall, a dividend increase is always good and we think Systemair is a strong dividend stock thanks to its track record and growing earnings. Earnings easily cover distributions and the company generates a lot of cash. Taking all this into account, it looks like this could be a good dividend opportunity.

It is important to note that companies with a consistent dividend policy generate more confidence among investors than those with an irregular one. At the same time, there are other factors that our readers should consider before putting capital into a stock. As an example, we have identified 2 warning signs for Systemair that you should consider before investing. Is Systemair not quite the opportunity you were looking for? Take a look at our Selection of the highest dividend stocks.

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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.