INA-Industrija nafte d.d (ZGSE:INA) Has Announced That It Will Be Increasing Its Dividend To €20.00

INA-Industrija nafte, d.d.'s (ZGSE:INA) dividend will be increasing from last year's payment of the same period to €20.00 on 14th of July. Even though the dividend went up, the yield is still quite low at only 2.7%.

Check out our latest analysis for INA-Industrija nafte d.d

INA-Industrija nafte d.d Doesn't Earn Enough To Cover Its Payments

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, INA-Industrija nafte d.d's dividend was only 33% of earnings, however it was paying out 255% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Earnings per share could rise by 1.5% over the next year if things go the same way as they have for the last few years. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 154% over the next year.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of €4.47 in 2013 to the most recent total annual payment of €12.6. This means that it has been growing its distributions at 11% per annum over that time. INA-Industrija nafte d.d 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.

INA-Industrija nafte d.d May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. INA-Industrija nafte d.d hasn't seen much change in its earnings per share over the last five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think INA-Industrija nafte d.d's payments are rock solid. While INA-Industrija nafte d.d is earning enough to cover the payments, the cash flows are lacking. We don't think INA-Industrija nafte d.d is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for INA-Industrija nafte d.d that investors should know about before committing capital to this stock. 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.