Korado-Bulgaria AD (BUL:KBG) Has Announced A Dividend Of BGN0.10

The board of Korado-Bulgaria AD (BUL:KBG) has announced that it will pay a dividend of BGN0.10 per share on the 12th of October. This means the annual payment is 4.1% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Korado-Bulgaria AD

Korado-Bulgaria AD's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Korado-Bulgaria AD's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 9.5% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 60% by next year, which is in a pretty sustainable range.

Korado-Bulgaria AD's Dividend Has Lacked Consistency

Korado-Bulgaria AD has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2014, the dividend has gone from BGN0.08 total annually to BGN0.29. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

We Could See Korado-Bulgaria AD's Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Korado-Bulgaria AD has grown earnings per share at 9.5% per year over the past five years. Korado-Bulgaria AD definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Korado-Bulgaria AD's Dividend

Overall, we like to see the dividend staying consistent, and we think Korado-Bulgaria AD might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Korado-Bulgaria AD that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.