Sifi Cluj Retail (BVB:ARCU) Is Paying Out Less In Dividends Than Last Year

The board of Sifi Cluj Retail SA (BVB:ARCU) has announced it will be reducing its dividend by 29% from last year's payment of RON0.31 on the 7th of July, with shareholders receiving RON0.22. The yield is still above the industry average at 6.7%.

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Estimates Indicate Sifi Cluj Retail's Could Struggle to Maintain Dividend Payments In The Future

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 132% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Over the next year, EPS could expand by 10.0% if the company continues along the path it has been on recently. If the dividend continues on its recent course, the payout ratio in 12 months could be 110%, which is a bit high and could start applying pressure to the balance sheet.

View our latest analysis for Sifi Cluj Retail

Sifi Cluj Retail Doesn't Have A Long Payment History

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Dividend Growth Could Be Constrained

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Sifi Cluj Retail has grown earnings per share at 10% per year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

Sifi Cluj Retail's Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 5 warning signs for Sifi Cluj Retail (of which 2 are potentially serious!) you should know about. Is Sifi Cluj Retail 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.