Gielda Papierów Wartosciowych w Warszawie (WSE:GPW) Is Paying Out A Larger Dividend Than Last Year

Gielda Papierów Wartosciowych w Warszawie S.A. (WSE:GPW) will increase its dividend on the 5th of August to zł2.74. The announced payment will take the dividend yield to 7.4%, which is in line with the average for the industry.

See our latest analysis for Gielda Papierów Wartosciowych w Warszawie

Gielda Papierów Wartosciowych w Warszawie's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. 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 177% 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.

Looking forward, earnings per share is forecast to fall by 3.2% over the next year. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 76%, meaning that most of the company's earnings are being paid out to shareholders.

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 zł3.21 in 2012 to the most recent annual payment of zł2.70. The dividend has shrunk at around 1.7% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been crawling upwards at 4.0% per year. Gielda Papierów Wartosciowych w Warszawie's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Gielda Papierów Wartosciowych w Warszawie's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Gielda Papierów Wartosciowych w Warszawie (of which 1 is significant!) you should know about. 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.