Petrolina (Holdings) Public Ltd (CSE:PHL) will pay a dividend of €0.02 on the 7th of November. This means the annual payment will be 3.6% of the current stock price, which is lower than the industry average.
View our latest analysis for Petrolina (Holdings)
Petrolina (Holdings) Is Paying Out More Than It Is Earning
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Petrolina (Holdings)'s dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.
If the company can't turn things around, EPS could fall by 2.0% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 99%, which is definitely a bit high to be sustainable going forward.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the dividend has gone from €0.068 total annually to €0.037. Doing the maths, this is a decline of about 5.9% per year. A company that decreases its dividend over time generally isn't what we are looking for.
Dividend Growth May Be Hard To Achieve
Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Petrolina (Holdings) has seen earnings per share falling at 2.0% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.
The Dividend Could Prove To Be Unreliable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 4 warning signs for Petrolina (Holdings) (2 are a bit unpleasant!) 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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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.
About CSE:PHL
Petrolina (Holdings)
Engages in the import and marketing of petroleum products in Cyprus.
Moderate unattractive dividend payer.
