Thrace Plastics Holding (ATH:PLAT) Is Increasing Its Dividend To €0.1898

The board of Thrace Plastics Holding Company S.A. (ATH:PLAT) has announced that it will be paying its dividend of €0.1898 on the 7th of June, an increased payment from last year's comparable dividend. This makes the dividend yield 6.1%, which is above the industry average.

See our latest analysis for Thrace Plastics Holding

Thrace Plastics Holding Doesn't Earn Enough To Cover Its Payments

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite comfortably covered by Thrace Plastics Holding's earnings, but it was a bit tighter on the cash flow front. The business is earning enough to make the dividend feasible, but the cash payout ratio of 87% indicates it is more focused on returning cash to shareholders than growing the business.

Over the next year, EPS is forecast to fall by 42.3%. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 108%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was €0.046, compared to the most recent full-year payment of €0.258. This means that it has been growing its distributions at 19% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Thrace Plastics Holding has seen EPS rising for the last five years, at 20% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Thrace Plastics Holding will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Thrace Plastics Holding has been making. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Thrace Plastics Holding has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is Thrace Plastics Holding not quite the opportunity you were looking for? Why not check out our selection of top 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.