Tsakos Energy Navigation Limited's (NYSE:TNP) investors are due to receive a payment of US$0.10 per share on 20th of July. This means the annual payment will be 1.0% of the current stock price, which is lower than the industry average.
Tsakos Energy Navigation's Distributions May Be Difficult To Sustain
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Despite not generating a profit, Tsakos Energy Navigation is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.
Recent, EPS has fallen by 27.1%, so this could continue over the next year. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.
The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from US$3.00 in 2012 to the most recent annual payment of US$0.20. This works out to a decline of approximately 93% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth Potential Is Shaky
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Tsakos Energy Navigation's EPS has fallen by approximately 27% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.
We'd also point out that Tsakos Energy Navigation has issued stock equal to 55% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
We're Not Big Fans Of Tsakos Energy Navigation's Dividend
Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. The dividend doesn't inspire confidence that it will provide solid income in the future.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 4 warning signs for Tsakos Energy Navigation you should be aware of, and 3 of them shouldn't be ignored. 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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