Gurktaler (VIE:GAGS) Will Pay A Smaller Dividend Than Last Year

Gurktaler Aktiengesellschaft (VIE:GAGS) has announced that on 24th of September, it will be paying a dividend of€0.90, which a reduction from last year's comparable dividend. The yield is still above the industry average at 4.3%.

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Gurktaler'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. Before making this announcement, Gurktaler's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Over the next year, EPS could expand by 6.5% if the company continues along the path it has been on recently. If the dividend continues on its recent course, the payout ratio in 12 months could be 114%, which is a bit high and could start applying pressure to the balance sheet.

Check out our latest analysis for Gurktaler

Gurktaler's Dividend Has Lacked Consistency

Looking back, Gurktaler's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2016, the annual payment back then was €0.08, compared to the most recent full-year payment of €0.90. This means that it has been growing its distributions at 31% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Gurktaler has impressed us by growing EPS at 6.5% per year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 5 warning signs for Gurktaler (of which 1 is concerning!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.