Luka Koper d.d (LJSE:LKPG) Is Reducing Its Dividend To €1.14

Luka Koper d.d. (LJSE:LKPG) has announced it will be reducing its dividend payable on the 31st of August to €1.14. However, the dividend yield of 4.7% is still a decent boost to shareholder returns.

View our latest analysis for Luka Koper d.d

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last dividend, Luka Koper d.d is earning enough to cover the payment, but the it makes up 1,156% 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.

EPS is set to fall by 6.5% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 52%, which is definitely feasible to continue.

Luka Koper d.d's Dividend Has Lacked Consistency

Looking back, Luka Koper d.d's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from €0.17 in 2013 to the most recent annual payment of €1.14. This means that it has been growing its distributions at 24% per annum 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.

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. It's not great to see that Luka Koper d.d's earnings per share has fallen at approximately 6.5% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

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 the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Luka Koper d.d that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.