Grupa RECYKL's (WSE:GRC) Dividend Will Be Increased To PLN1.70

Grupa RECYKL S.A. (WSE:GRC) has announced that it will be increasing its periodic dividend on the 10th of October to PLN1.70, which will be 42% higher than last year's comparable payment amount of PLN1.20. Although the dividend is now higher, the yield is only 1.7%, which is below the industry average.

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Grupa RECYKL's Future Dividend Projections Appear Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Grupa RECYKL was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share could rise by 29.0% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Grupa RECYKL

Grupa RECYKL Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of PLN0.50 in 2021 to the most recent total annual payment of PLN1.20. This works out to be a compound annual growth rate (CAGR) of approximately 24% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Grupa RECYKL has impressed us by growing EPS at 29% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Grupa RECYKL's payments are rock solid. While Grupa RECYKL 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for Grupa RECYKL that investors need to be conscious of moving forward. Is Grupa RECYKL 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.