Inpro's (WSE:INP) Shareholders Will Receive A Smaller Dividend Than Last Year

The board of Inpro S.A. (WSE:INP) has announced that the dividend on 12th of August will be reduced by 50% to zł0.25. This means that the annual payment is 3.6% of the current stock price, which is lower than what the rest of the industry is paying.

View our latest analysis for Inpro

Inpro's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Inpro was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

If the trend of the last few years continues, EPS will grow by 5.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the dividend has gone from zł0.20 to zł0.50. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Inpro might have put its house in order since then, but we remain cautious.

We Could See Inpro's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see Inpro has been growing its earnings per share at 5.1% a year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On Inpro's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Inpro that investors need to be conscious of moving forward. Is Inpro 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.