SNGN Romgaz's (BVB:SNG) Shareholders Will Receive A Smaller Dividend Than Last Year

SNGN Romgaz SA's (BVB:SNG) dividend is being reduced from last year's payment covering the same period to RON0.1425 on the 26th of July. However, the dividend yield of 6.1% still remains in a typical range for the industry.

See our latest analysis for SNGN Romgaz

SNGN Romgaz's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, SNGN Romgaz's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 45.9% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 32%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was RON2.60, compared to the most recent full-year payment of RON0.356. This works out to a decline of approximately 86% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. SNGN Romgaz's EPS has fallen by approximately 27% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Just as an example, we've come across 2 warning signs for SNGN Romgaz you should be aware of, and 1 of them is potentially serious. Is SNGN Romgaz 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.