Public Power (ATH:PPC) Will Pay A Larger Dividend Than Last Year At €0.40

Public Power Corporation S.A. (ATH:PPC) has announced that it will be increasing its dividend from last year's comparable payment on the 25th of July to €0.40. Despite this raise, the dividend yield of 3.0% is only a modest boost to shareholder returns.

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Public Power's Future Dividend Projections Appear Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. This is a pretty unsustainable practice, and could be risky if continued for the long term.

The next year is set to see EPS grow by 76.8%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 61% which would be quite comfortable going to take the dividend forward.

See our latest analysis for Public Power

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was €0.05 in 2015, and the most recent fiscal year payment was €0.40. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. Public Power has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Public Power Might Find It Hard To Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Public Power has been growing its earnings per share at 90% a year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Public Power is not retaining those earnings to reinvest in growth.

Public Power's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Public Power will make a great income stock. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Public Power has 4 warning signs (and 1 which is potentially serious) we think you should know about. 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.