Allterco AD's (BUL:A4L) Shareholders Will Receive A Smaller Dividend Than Last Year

The board of Allterco AD (BUL:A4L) has announced that the dividend on 10th of August will be reduced by 50% to лв0.10. This payment takes the dividend yield to 0.5%, which only provides a modest boost to overall returns.

View our latest analysis for Allterco AD

Allterco AD's Earnings Easily Cover the Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Allterco AD was paying only paying out a fraction of earnings, but the payment was a massive 157% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, earnings per share is forecast to rise by 15.7% over the next year. If the dividend continues on this path, the payout ratio could be 4.9% by next year, which we think can be pretty sustainable going forward.

Allterco AD's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2019, the dividend has gone from лв0.18 to лв0.20. This means that it has been growing its distributions at 3.6% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Allterco AD has seen EPS rising for the last five years, at 57% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

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. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Allterco AD that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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