Ilirija d.d's (ZGSE:ILRA) Shareholders Will Receive A Bigger Dividend Than Last Year

Ilirija d.d. (ZGSE:ILRA) will increase its dividend from last year's comparable payment on the 22nd of May to €0.80. This takes the annual payment to 2.9% of the current stock price, which unfortunately is below what the industry is paying.

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Ilirija d.d's Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Ilirija d.d was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 3.2% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 61%, which is definitely feasible to continue.

See our latest analysis for Ilirija d.d

Ilirija d.d Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of €0.243 in 2015 to the most recent total annual payment of €0.80. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Over the past five years, it looks as though Ilirija d.d's EPS has declined at around 3.2% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Ilirija d.d's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Ilirija d.d (of which 1 doesn't sit too well with us!) you should know about. Is Ilirija d.d 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.