Surgutneftegas (MCX:SNGS) Has Announced That It Will Be Increasing Its Dividend To ₽0.70

Surgutneftegas Public Joint Stock Company (MCX:SNGS) has announced that it will be increasing its dividend on the 1st of January to ₽0.70. Although the dividend is now higher, the yield is only 2.0%, which is below the industry average.

See our latest analysis for Surgutneftegas

Surgutneftegas' Earnings Easily Cover the Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Surgutneftegas is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to fall by 82.6% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 21%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Surgutneftegas Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from ₽0.45 in 2011 to the most recent annual payment of ₽0.70. This works out to be a compound annual growth rate (CAGR) of approximately 4.5% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Surgutneftegas May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Unfortunately, Surgutneftegas' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Surgutneftegas' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

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. As an example, we've identified 2 warning signs for Surgutneftegas that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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