Ericsson Nikola Tesla d.d's (ZGSE:ERNT) Shareholders Will Receive A Bigger Dividend Than Last Year

Ericsson Nikola Tesla d.d. (ZGSE:ERNT) has announced that it will be increasing its dividend from last year's comparable payment on the 11th of July to €12.00. This takes the annual payment to 2.7% of the current stock price, which is about average for the industry.

View our latest analysis for Ericsson Nikola Tesla d.d

Ericsson Nikola Tesla d.d Is Paying Out More Than It Is Earning

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by Ericsson Nikola Tesla d.d's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, EPS could fall by 32.6% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 175%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was €22.28, compared to the most recent full-year payment of €6.00. This works out to a decline of approximately 73% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Ericsson Nikola Tesla d.d's earnings per share has fallen 33% over the past year. Reduced dividend payments are a common consequence of declining earnings. However, we would never make any decisions based on only a single year of data, especially when assessing long term dividend potential.

Our Thoughts On Ericsson Nikola Tesla d.d's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Ericsson Nikola Tesla d.d that investors should take into consideration. Is Ericsson Nikola Tesla 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.