Talex (WSE:TLX) Has Announced That Its Dividend Will Be Reduced To PLN0.25

The board of Talex S.A. (WSE:TLX) has announced that the dividend on 3rd of July will be reduced by 72% from last year's PLN0.90 to PLN0.25. However, the dividend yield of 4.3% is still a decent boost to shareholder returns.

Our free stock report includes 6 warning signs investors should be aware of before investing in Talex. Read for free now.

Talex's Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment made up 84% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

EPS is set to fall by 18.2% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, the payout ratio in 12 months could be 29%, which is more comfortable than the current payout ratio.

See our latest analysis for Talex

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of PLN1.30 in 2015 to the most recent total annual payment of PLN0.90. Doing the maths, this is a decline of about 3.6% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Talex's EPS has fallen by approximately 18% per year during the past five years. 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.

In Summary

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. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Talex has 6 warning signs (and 1 which is a bit unpleasant) we think you should know about. 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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