Polskie Towarzystwo Wspierania Przedsiebiorczosci (WSE:PTW) Has Announced That Its Dividend Will Be Reduced To PLN4.69

Polskie Towarzystwo Wspierania Przedsiebiorczosci S.A. (WSE:PTW) is reducing its dividend from last year's comparable payment to PLN4.69 on the 16th of July. This means the annual payment is 6.7% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Polskie Towarzystwo Wspierania Przedsiebiorczosci

Polskie Towarzystwo Wspierania Przedsiebiorczosci Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, the dividend made up 88% of cash flows, but a higher proportion of net income. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

EPS is set to fall by 7.2% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 211%, which could put the dividend under pressure if earnings don't start to improve.

Polskie Towarzystwo Wspierania Przedsiebiorczosci's Dividend Has Lacked Consistency

Looking back, Polskie Towarzystwo Wspierania Przedsiebiorczosci's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of PLN0.33 in 2015 to the most recent total annual payment of PLN4.69. This works out to be a compound annual growth rate (CAGR) of approximately 34% 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.

Dividend Growth Is Doubtful

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. In the last five years, Polskie Towarzystwo Wspierania Przedsiebiorczosci's earnings per share has shrunk at approximately 7.2% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 4 warning signs for Polskie Towarzystwo Wspierania Przedsiebiorczosci that investors should take into consideration. 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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