Korado-Bulgaria AD's (BUL:KBG) Upcoming Dividend Will Be Larger Than Last Year's

Korado-Bulgaria AD (BUL:KBG) will increase its dividend from last year's comparable payment on the 17th of July to BGN0.19. This makes the dividend yield 4.0%, which is above the industry average.

See our latest analysis for Korado-Bulgaria AD

Korado-Bulgaria AD's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Korado-Bulgaria AD was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, EPS could fall by 3.8% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 65%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Korado-Bulgaria AD's Dividend Has Lacked Consistency

Looking back, Korado-Bulgaria AD's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2015, the dividend has gone from BGN0.08 total annually to BGN0.20. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Korado-Bulgaria AD has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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. It's not great to see that Korado-Bulgaria AD's earnings per share has fallen at approximately 3.8% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Korado-Bulgaria AD's Dividend

Overall, we always like to see the dividend being raised, but we don't think Korado-Bulgaria AD will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Korado-Bulgaria AD is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 4 warning signs for Korado-Bulgaria AD (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.

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.

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