Cherkizovo Group (MCX:GCHE) Is Increasing Its Dividend To ₽85.27

Public Joint Stock Company "Cherkizovo Group" (MCX:GCHE) will increase its dividend on the 1st of January to ₽85.27. This will take the dividend yield from 9.2% to 9.2%, providing a nice boost to shareholder returns.

Check out our latest analysis for Cherkizovo Group

Cherkizovo Group's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last dividend, Cherkizovo Group is earning enough to cover the payment, but the it makes up 196% 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.

Over the next year, EPS could expand by 50.2% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.

Cherkizovo Group's Dividend Has Lacked Consistency

It's comforting to see that Cherkizovo Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2014, the dividend has gone from ₽24.26 to ₽219. This means that it has been growing its distributions at 37% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Cherkizovo Group has impressed us by growing EPS at 50% 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 Cherkizovo Group could prove to be a strong dividend payer.

Our Thoughts On Cherkizovo Group's 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. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 3 warning signs for Cherkizovo Group that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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