Vassiliko Cement Works (CSE:VCW) Has Announced That Its Dividend Will Be Reduced To €0.13

The board of Vassiliko Cement Works Public Company Ltd (CSE:VCW) has announced that the dividend on 28th of June will be reduced by 13% to €0.13. The yield is still above the industry average at 7.4%.

View our latest analysis for Vassiliko Cement Works

Vassiliko Cement Works' Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Vassiliko Cement Works' dividend made up quite a large proportion of earnings but only of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Over the next year, EPS could expand by 0.6% if recent trends continue. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 74% which brings it into quite a comfortable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the first annual payment was €0.015, compared to the most recent full-year payment of €0.23. This works out to be a compound annual growth rate (CAGR) of approximately 31% 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.

Dividend Growth May Be Hard To Achieve

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. Unfortunately, Vassiliko Cement Works' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

Our Thoughts On Vassiliko Cement Works' Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

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. Case in point: We've spotted 3 warning signs for Vassiliko Cement Works (of which 1 is a bit unpleasant!) you should know about. Is Vassiliko Cement Works not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.