Cherkizovo Group (MCX:GCHE) Is Paying Out A Larger Dividend Than Last Year

By
Simply Wall St
Published
September 05, 2021
MISX:GCHE
Source: Shutterstock

Public Joint Stock Company "Cherkizovo Group"'s (MCX:GCHE) dividend will be increasing to ₽85.27 on 1st of January. This makes the dividend yield 7.7%, which is above the industry average.

View our latest analysis for Cherkizovo Group

Cherkizovo Group's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last dividend, Cherkizovo Group is earning enough to cover the payment, but the it makes up 214% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS could expand by 76.2% if recent trends continue. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.

historic-dividend
MISX:GCHE Historic Dividend September 6th 2021

Cherkizovo Group's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. 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 works out to be a compound annual growth rate (CAGR) of approximately 37% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Cherkizovo Group has grown earnings per share at 76% per year over the past five years. Cherkizovo Group is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

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. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for Cherkizovo Group that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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