Luka Koper d.d (LJSE:LKPG) Is Paying Out Less In Dividends Than Last Year

Luka Koper d.d.'s (LJSE:LKPG) dividend is being reduced to €0.71 on the 31st of August. Despite the cut, the dividend yield of 3.0% will still be comparable to other companies in the industry.

See our latest analysis for Luka Koper d.d

Luka Koper d.d's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Luka Koper d.d was paying only paying out a fraction of earnings, but the payment was a massive 720% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Unless the company can turn things around, EPS could fall by 6.5% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 32%, which is definitely feasible to continue.

Luka Koper d.d's Dividend Has Lacked Consistency

Luka Koper d.d has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2013, the dividend has gone from €0.17 to €0.71. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. Luka Koper d.d has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Luka Koper d.d has seen earnings per share falling at 6.5% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Luka Koper d.d's Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While Luka Koper d.d is earning enough to cover the payments, the cash flows are lacking. 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. Taking the debate a bit further, we've identified 1 warning sign for Luka Koper d.d that investors need to be conscious of moving forward. 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.