Gielda Papierów Wartosciowych w Warszawie (WSE:GPW) Has Announced That Its Dividend Will Be Reduced To PLN2.70

Gielda Papierów Wartosciowych w Warszawie S.A.'s (WSE:GPW) dividend is being reduced from last year's payment covering the same period to PLN2.70 on the 7th of August. This payment takes the dividend yield to 7.2%, which only provides a modest boost to overall returns.

See our latest analysis for Gielda Papierów Wartosciowych w Warszawie

Gielda Papierów Wartosciowych w Warszawie's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Gielda Papierów Wartosciowych w Warszawie's dividend made up quite a large proportion of earnings but only 73% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to fall by 0.5%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 92%, which is definitely on the higher side.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from PLN0.78 total annually to PLN2.70. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. 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.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Gielda Papierów Wartosciowych w Warszawie's EPS has declined at around 3.8% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Gielda Papierów Wartosciowych w Warszawie is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Gielda Papierów Wartosciowych w Warszawie that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.