Gradus AD (BUL:GR6) Has Affirmed Its Dividend Of лв0.022

Gradus AD (BUL:GR6) has announced that it will pay a dividend of лв0.022 per share on the 26th of July. Based on this payment, the dividend yield on the company's stock will be 2.9%, which is an attractive boost to shareholder returns.

See our latest analysis for Gradus AD

Gradus AD's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Gradus AD'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.

The next year is set to see EPS grow by 161.0%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 57% which brings it into quite a comfortable range.

Gradus AD's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The first annual payment during the last 2 years was лв0.10 in 2019, and the most recent fiscal year payment was лв0.044. Dividend payments have fallen sharply, down 56% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Gradus AD's EPS has fallen by approximately 31% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Gradus AD's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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 Gradus AD is a great stock to add to your portfolio if income is your focus.

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. As an example, we've identified 2 warning signs for Gradus AD that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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