Luka Koper d.d. (LJSE:LKPG) has announced that on 31st of August, it will be paying a dividend of€1.14, which a reduction from last year's comparable dividend. This means that the dividend yield is 3.0%, which is a bit low when comparing to other companies in the industry.
Luka Koper d.d's Earnings Easily Cover the Distributions
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, based ont he last payment, Luka Koper d.d was earning enough to cover the dividend pretty comfortably. The business is earning enough to make the dividend feasible, but the cash payout ratio of 82% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.
Unless the company can turn things around, EPS could fall by 3.1% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 40%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Luka Koper d.d'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. The annual payment during the last 9 years was €0.17 in 2013, and the most recent fiscal year payment was €0.71. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
Luka Koper d.d May Find It Hard To Grow The Dividend
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. Over the past five years, it looks as though Luka Koper d.d's EPS has declined at around 3.1% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
Our Thoughts On Luka Koper d.d's Dividend
Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While Luka Koper d.d is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.
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. As an example, we've identified 2 warning signs for Luka Koper d.d that you should be aware of before investing. Is Luka Koper d.d 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.
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