Instal Kraków (WSE:INK) Is Paying Out Less In Dividends Than Last Year

Instal Kraków S.A.'s (WSE:INK) dividend is being reduced by 20% to PLN2.00 per share on 14th of November, in comparison to last year's comparable payment of PLN2.50. The dividend yield of 6.2% is still a nice boost to shareholder returns, despite the cut.

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Instal Kraków's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Instal Kraków is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

If the trend of the last few years continues, EPS will grow by 7.5% over the next 12 months. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Instal Kraków

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was PLN0.20 in 2015, and the most recent fiscal year payment was PLN2.50. This means that it has been growing its distributions at 29% per annum over that time. 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.

Instal Kraków Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Instal Kraków has been growing its earnings per share at 7.5% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Instal Kraków's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While Instal Kraków is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Instal Kraków that investors should know about before committing capital to this stock. Is Instal Kraków 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.