TKH Group (AMS:TWEKA) Has Announced That Its Dividend Will Be Reduced To €1.50

TKH Group N.V. (AMS:TWEKA) has announced that on 23rd of May, it will be paying a dividend of€1.50, which a reduction from last year's comparable dividend. However, the dividend yield of 4.3% is still a decent boost to shareholder returns.

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TKH Group's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment was quite easily covered by earnings, but it made up 177% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Over the next year, EPS is forecast to expand by 54.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 41%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for TKH Group

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 €1.00 in 2015 to the most recent total annual payment of €1.50. This means that it has been growing its distributions at 4.1% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

We Could See TKH Group's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that TKH Group has been growing its earnings per share at 8.8% a year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While TKH Group is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for TKH Group that investors should know about before committing capital to this stock. Is TKH Group 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.