Tallinna Kaubamaja Grupp (TAL:TKM1T) Is Increasing Its Dividend To €0.68

Tallinna Kaubamaja Grupp AS (TAL:TKM1T) has announced that it will be increasing its dividend on the 6th of April to €0.68. This makes the dividend yield 6.0%, which is above the industry average.

Check out our latest analysis for Tallinna Kaubamaja Grupp

Tallinna Kaubamaja Grupp's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Tallinna Kaubamaja Grupp's dividend made up quite a large proportion of earnings but only 43% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

EPS is set to grow by 4.5% over the next year if recent trends continue. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 87%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2012, the first annual payment was €0.28, compared to the most recent full-year payment of €0.68. This means that it has been growing its distributions at 9.3% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been crawling upwards at 4.5% per year. Slow growth and a high payout ratio could mean that Tallinna Kaubamaja Grupp has maxed out the amount that it has been able to pay to shareholders. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

Our Thoughts On Tallinna Kaubamaja Grupp's Dividend

Overall, we always like to see the dividend being raised, but we don't think Tallinna Kaubamaja Grupp will make a great income stock. 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. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 2 warning signs for Tallinna Kaubamaja Grupp (1 is significant!) that you should be aware of before investing. 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.