Asseco Poland boosts dividend payout

The board of Asseco Poland S.A. has announced that it will be increasing its dividend by 3.3% to zł3.11. This takes the annual payment to 4.3% of the current stock price.

Unless the payments are sustainable, the dividend yield doesn’t mean too much. Based on the last payment, Asseco Poland was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 0.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 65% by next year, which is in a pretty sustainable range.

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from zł1.80 in 2011 to the most recent annual payment of zł3.01. This works out to be a compound annual growth rate (CAGR) of approximately 5.3% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Investors could be attracted to the stock based on the quality of its payment history. However, Asseco Poland’s EPS was effectively flat over the past five years, which could stop the company from paying more every year. Growth of 1.9% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn’t bad in itself, but unless earnings growth pick up we wouldn’t expect dividends to grow either.


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