Auto Hrvatska d.d (ZGSE:AUHR) Has Announced A Dividend Of €8.00

Auto Hrvatska d.d. (ZGSE:AUHR) has announced that it will pay a dividend of €8.00 per share on the 23rd of May. This means the annual payment is 3.6% of the current stock price, which is above the average for the industry.

Auto Hrvatska d.d's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Auto Hrvatska d.d was paying a whopping 108% as a dividend, but this only made up 37% of its overall earnings. 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.

Over the next year, EPS could expand by 10.9% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Auto Hrvatska d.d

Auto Hrvatska d.d Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The annual payment during the last 2 years was €5.31 in 2023, and the most recent fiscal year payment was €8.00. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. Auto Hrvatska d.d has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Auto Hrvatska d.d's earnings per share is up 11% over the past year. This is a good sign, and could set the company up to be a solid dividend payer in the future if it continues. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting. We do note though, one year is too short a time to be drawing strong conclusions about a company's future prospects.

Our Thoughts On Auto Hrvatska d.d's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Auto Hrvatska d.d's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Auto Hrvatska d.d is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Auto Hrvatska d.d that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.