Gielda Papierów Wartosciowych w Warszawie (WSE:GPW) Is Increasing Its Dividend To PLN3.00

The board of Gielda Papierów Wartosciowych w Warszawie S.A. (WSE:GPW) has announced that the dividend on 7th of August will be increased to PLN3.00, which will be 11% higher than last year's payment of PLN2.70 which covered the same period. This takes the annual payment to 5.5% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Gielda Papierów Wartosciowych w Warszawie

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

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. At the time of the last dividend payment, Gielda Papierów Wartosciowych w Warszawie was paying out a very large proportion of what it was earning and 3,760% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Over the next year, EPS is forecast to expand by 12.7%. If the dividend continues along recent trends, we estimate the payout ratio could reach 75%, which is on the higher side, but certainly still feasible.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was PLN0.78 in 2014, and the most recent fiscal year payment was PLN2.70. This means that it has been growing its distributions at 13% per annum over that time. Gielda Papierów Wartosciowych w Warszawie has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that Gielda Papierów Wartosciowych w Warszawie's earnings per share has fallen at approximately 2.6% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Gielda Papierów Wartosciowych w Warszawie has 2 warning signs (and 1 which can't be ignored) we think you should know about. Is Gielda Papierów Wartosciowych w Warszawie 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.

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