Wirtek (CPH:WIRTEK) Will Pay A Smaller Dividend Than Last Year

Wirtek A/S (CPH:WIRTEK) has announced that on 28th of April, it will be paying a dividend ofDKK0.23, which a reduction from last year's comparable dividend. The dividend yield of 3.8% is still a nice boost to shareholder returns, despite the cut.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Wirtek's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. At the time of the last dividend payment, Wirtek was paying out a very large proportion of what it was earning and 101% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Earnings per share could rise by 4.5% over the next year if things go the same way as they have for the last few years. If recent patterns in the dividend continue, the payout ratio in 12 months could be 94% which is a bit high but can definitely be sustainable.

See our latest analysis for Wirtek

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of DKK0.09 in 2015 to the most recent total annual payment of DKK0.23. This works out to be a compound annual growth rate (CAGR) of approximately 9.8% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Wirtek May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Wirtek has only grown its earnings per share at 4.5% per annum over the past five years. Wirtek's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

The Dividend Could Prove To Be Unreliable

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. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Wirtek is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 5 warning signs for Wirtek you should be aware of, and 2 of them are potentially serious. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.