Tsakos Energy Navigation's (NYSE:TEN) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Tsakos Energy Navigation Limited (NYSE:TEN) has announced that it will be paying its dividend of $0.90 on the 20th of December, an increased payment from last year's comparable dividend. This will take the annual payment to 9.9% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Tsakos Energy Navigation

Tsakos Energy Navigation's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Tsakos Energy Navigation's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 70.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 15% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was $1.00 in 2014, and the most recent fiscal year payment was $1.80. This implies that the company grew its distributions at a yearly rate of about 6.1% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Tsakos Energy Navigation has seen EPS rising for the last five years, at 50% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Our Thoughts On Tsakos Energy Navigation's Dividend

Overall, we always like to see the dividend being raised, but we don't think Tsakos Energy Navigation will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Case in point: We've spotted 3 warning signs for Tsakos Energy Navigation (of which 1 is potentially serious!) you should know about. Is Tsakos Energy Navigation 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.