Sopharma AD's (BUL:SFA) Dividend Will Be BGN0.08

Sopharma AD's (BUL:SFA) investors are due to receive a payment of BGN0.08 per share on 25th of August. This means that the annual payment will be 2.1% of the current stock price, which is in line with the average for the industry.

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Sopharma AD's Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, Sopharma AD's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 4.3% 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 40%, which is definitely feasible to continue.

View our latest analysis for Sopharma AD

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was BGN0.07, compared to the most recent full-year payment of BGN0.15. This works out to be a compound annual growth rate (CAGR) of approximately 7.9% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Sopharma AD has seen earnings per share falling at 4.3% 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.

Our Thoughts On Sopharma AD's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Sopharma AD that you should be aware of before investing. Is Sopharma AD 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.