Forever Entertainment (WSE:FOR) Is Paying Out A Dividend Of PLN0.06

Forever Entertainment S.A.'s (WSE:FOR) investors are due to receive a payment of PLN0.06 per share on 15th of December. This means the annual payment will be 1.9% of the current stock price, which is lower than the industry average.

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Forever Entertainment'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, Forever Entertainment was paying only paying out a fraction of earnings, but the payment was a massive 126% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

EPS is set to fall by 14.3% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 27%, which is definitely feasible to continue.

See our latest analysis for Forever Entertainment

Forever Entertainment's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2022, the dividend has gone from PLN0.03 total annually to PLN0.06. This implies that the company grew its distributions at a yearly rate of about 26% over that duration. 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 Has Limited Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though Forever Entertainment's EPS has declined at around 14% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Forever Entertainment's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Forever Entertainment is earning enough to cover the payments, the cash flows are lacking. We don't think Forever Entertainment is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Forever Entertainment (1 shouldn't be ignored!) that you should be aware of before investing. Is Forever Entertainment not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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