Luka Koper d.d's (LJSE:LKPG) Dividend Will Be Reduced To €0.71

Luka Koper d.d. (LJSE:LKPG) is reducing its dividend 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.

View our latest analysis for Luka Koper d.d

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

Solid dividend yields are great, but they only really help us if the payment is sustainable. 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. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, EPS could fall by 6.5% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 32%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Luka Koper d.d's Dividend Has Lacked Consistency

It's comforting to see that Luka Koper d.d has been paying a dividend for a number of years now, however it has been cut at least once in that time. 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. 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.

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. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

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

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Luka Koper d.d is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Luka Koper d.d that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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