AS Tallinna Sadam (TAL:TSM1T) Has Affirmed Its Dividend Of €0.073

AS Tallinna Sadam (TAL:TSM1T) will pay a dividend of €0.073 on the 17th of May. Based on this payment, the dividend yield on the company's stock will be 6.0%, which is an attractive boost to shareholder returns.

See our latest analysis for AS Tallinna Sadam

AS Tallinna Sadam's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, AS Tallinna Sadam's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Over the next year, EPS is forecast to expand by 51.5%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 66% which brings it into quite a comfortable range.

AS Tallinna Sadam's Dividend Has Lacked Consistency

AS Tallinna Sadam has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the annual payment back then was €0.134, compared to the most recent full-year payment of €0.073. This works out to a decline of approximately 46% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. AS Tallinna Sadam's earnings per share has shrunk at 11% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

AS Tallinna Sadam's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think AS Tallinna Sadam is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for AS Tallinna Sadam that investors need to be conscious of moving forward. 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.