Orange Polska's (WSE:OPL) Dividend Will Be Increased To PLN0.35

Orange Polska S.A.'s (WSE:OPL) dividend will be increasing from last year's payment of the same period to PLN0.35 on 6th of July. This takes the annual payment to 4.8% of the current stock price, which is about average for the industry.

View our latest analysis for Orange Polska

Orange Polska's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last payment was quite easily covered by earnings, but it made up 168% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

EPS is set to fall by 3.6% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 49%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of PLN1.00 in 2013 to the most recent total annual payment of PLN0.35. Doing the maths, this is a decline of about 10.0% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Orange Polska has impressed us by growing EPS at 62% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Orange Polska could prove to be a strong dividend payer.

Our Thoughts On Orange Polska's Dividend

Overall, we always like to see the dividend being raised, but we don't think Orange Polska will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Orange Polska that investors need to be conscious of moving forward. Is Orange Polska 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.