TFF Group's (EPA:TFF) Dividend Is Being Reduced To €0.50

TFF Group's (EPA:TFF) dividend is being reduced from last year's payment covering the same period to €0.50 on the 6th of November. This means that the annual payment will be 2.9% of the current stock price, which is in line with the average for the industry.

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TFF Group's Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. TFF Group is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 154.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 15%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for TFF Group

TFF Group Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was €0.20 in 2015, and the most recent fiscal year payment was €0.50. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

TFF Group May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown at around 2.9% a year for the past five years, which isn't massive but still better than seeing them shrink. While EPS growth is quite low, TFF Group has the option to increase the payout ratio to return more cash to shareholders.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While TFF Group is earning enough to cover the payments, the cash flows are lacking. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for TFF Group (1 shouldn't be ignored!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.