Jadranski naftovod d.d (ZGSE:JNAF) Is Paying Out A Larger Dividend Than Last Year

The board of Jadranski naftovod d.d. (ZGSE:JNAF) has announced that it will be paying its dividend of HRK11.52 on the 4th of August, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 1.2%.

See our latest analysis for Jadranski naftovod d.d

Jadranski naftovod d.d's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Jadranski naftovod d.d's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 1.0% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 3.5%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of HRK20.36 in 2013 to the most recent total annual payment of HRK75.36. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Jadranski naftovod d.d's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. If Jadranski naftovod d.d is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. 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.

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. As an example, we've identified 2 warning signs for Jadranski naftovod d.d that you should be aware of before investing. Is Jadranski naftovod 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.