Tallinna Kaubamaja Grupp's (TAL:TKM1T) Upcoming Dividend Will Be Larger Than Last Year's

Tallinna Kaubamaja Grupp AS (TAL:TKM1T) has announced that it will be increasing its dividend from last year's comparable payment on the 8th of April to €0.72. This takes the dividend yield to 6.9%, which shareholders will be pleased with.

See our latest analysis for Tallinna Kaubamaja Grupp

Tallinna Kaubamaja Grupp's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment made up 78% of earnings, but cash flows were much higher. 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.

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. The dividend has gone from an annual total of €0.35 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 7.5% a year 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.

Tallinna Kaubamaja Grupp May Find It Hard To Grow The Dividend

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. Earnings has been rising at 4.2% per annum over the last five years, which admittedly is a bit slow. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. 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.

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, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Tallinna Kaubamaja Grupp that investors should take into consideration. Is Tallinna Kaubamaja Grupp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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