Asseco Poland (WSE:ACP) Is Increasing Its Dividend To PLN3.50

The board of Asseco Poland S.A. (WSE:ACP) has announced that the dividend on 28th of June will be increased to PLN3.50, which will be 4.2% higher than last year's payment of PLN3.36 which covered the same period. This makes the dividend yield about the same as the industry average at 3.8%.

See our latest analysis for Asseco Poland

Asseco Poland's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Asseco Poland was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 8.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 54%, which is in the range that makes us comfortable with the sustainability of the dividend.

Asseco Poland Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was PLN2.19 in 2013, and the most recent fiscal year payment was PLN3.36. This implies that the company grew its distributions at a yearly rate of about 4.4% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Asseco Poland May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, Asseco Poland's EPS was effectively flat over the past five years, which could stop the company from paying more every year. The company has been growing at a pretty soft 1.5% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

We Really Like Asseco Poland's Dividend

Overall, a dividend increase is always good, and we think that Asseco Poland is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 5 Asseco Poland analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Asseco Poland not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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