SkiStar (STO:SKIS B) has announced that it will increase its dividend to SEK 3.00

SkiStar AB (publisher) (STO:SKIS B) will increase its dividend from last year’s comparable payout on December 16 to SEK 3.00. This brings the dividend yield to 2.6%, which will delight shareholders.

Check out our latest analysis for SkiStar

SkiStar payout has strong revenue coverage

A big dividend yield for a few years doesn’t mean much if it can’t be sustained. However, prior to this announcement, SkiStar’s dividend was comfortably covered by both cash flow and earnings. As a result, much of what he earned was plowed back into the business.

Looking ahead, earnings per share are expected to fall 13.9% over the next year. If the dividend continues on the path it has taken recently, we estimate the payout ratio could be 41%, which is comfortable for the business to continue in the future.

OM:SKIS B Historic Dividend November 14, 2022

Dividend volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the past 10 years. Since 2012, the annual payment at the time was 1.75 SEK, compared to the last annual payment of 3.00 SEK. This equates to a compound annual growth rate (CAGR) of approximately 5.5% per year during this period. It’s good to see the dividend growing at a decent pace, but the dividend has been cut at least once in the past. SkiStar may have tidied up since, but we remain cautious.

The dividend should increase

With a relatively volatile dividend, it is even more important to assess whether earnings per share are increasing, which could indicate dividend growth in the future. SkiStar has seen EPS increase over the past five years, at 11% per year. With decent growth and a low payout ratio, we think this bodes well for SkiStar’s prospects of increasing its dividend payouts going forward.

We really like the SkiStar dividend

Overall, we think it could be an attractive income stock, and it’s only getting better by paying a higher dividend this year. Distributions are easily covered by earnings and plenty of cash is also generated. Note that earnings are expected to fall over the next 12 months, which won’t be a problem if it doesn’t become a trend, but could cause some turbulence over the next year. Considering all of this, it looks like a good dividend opportunity.

Market movements testify to the valuation of a consistent dividend policy over a more unpredictable one. Meanwhile, despite the importance of dividend payments, these are not the only factors our readers should be aware of when evaluating a company. For example, we encountered 3 warning signs for SkiStar you should be aware, and 1 of them is a bit unpleasant. Looking for more high yield dividend ideas? Try our collection of strong dividend payers.

Valuation is complex, but we help make it simple.

Find out if Ski Star is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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