Azelis Group (EBR:AZE) Will Pay A Smaller Dividend Than Last Year

Azelis Group NV's (EBR:AZE) dividend is being reduced from last year's payment covering the same period to €0.154 on the 2nd of July. This payment takes the dividend yield to 1.2%, which only provides a modest boost to overall returns.

View our latest analysis for Azelis Group

Azelis Group's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Azelis Group was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 61.1%. If the dividend continues on this path, the payout ratio could be 13% by next year, which we think can be pretty sustainable going forward.

Azelis Group's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The annual payment during the last 2 years was €0.03 in 2022, and the most recent fiscal year payment was €0.22. This works out to be a compound annual growth rate (CAGR) of approximately 171% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Azelis Group has grown earnings per share at 49% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Azelis Group's Dividend

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Azelis Group has the makings of a solid income stock moving forward. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Azelis Group that investors need to be conscious of moving forward. Is Azelis Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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