Votum (WSE:VOT) Has Announced That Its Dividend Will Be Reduced To PLN2.42

Votum S.A.'s (WSE:VOT) dividend is being reduced from last year's payment covering the same period to PLN2.42 on the 17th of December. The dividend yield of 7.1% is still a nice boost to shareholder returns, despite the cut.

Check out our latest analysis for Votum

Votum's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Votum was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 90% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

Over the next year, EPS could expand by 61.1% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was PLN0.44, compared to the most recent full-year payment of PLN2.42. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Votum has been growing its earnings per share at 61% a 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.

Our Thoughts On Votum's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.

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. To that end, Votum has 2 warning signs (and 1 which is a bit concerning) we think you should know about. Is Votum 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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