Tallinna Kaubamaja Grupp (TAL:TKM1T) Is Increasing Its Dividend To €0.72

Tallinna Kaubamaja Grupp AS (TAL:TKM1T) will increase its dividend from last year's comparable payment on the 8th of April to €0.72. This takes the dividend yield to 6.7%, which shareholders will be pleased with.

See our latest analysis for Tallinna Kaubamaja Grupp

Tallinna Kaubamaja Grupp's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, Tallinna Kaubamaja Grupp was paying out 78% of earnings, but a comparatively small 52% 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.

Over the next year, EPS could expand by 4.2% if the company continues along the path it has been on recently. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 81%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Tallinna Kaubamaja Grupp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of €0.15 in 2014 to the most recent total annual payment of €0.72. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. However, Tallinna Kaubamaja Grupp has only grown its earnings per share at 4.2% per annum over the past five years. 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

In summary, while it's always good to see the dividend being raised, we don't think Tallinna Kaubamaja Grupp's payments are rock solid. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. See if management have their own wealth at stake, by checking insider shareholdings in Tallinna Kaubamaja Grupp stock. 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.