Compagnie du Bois Sauvage (EBR:COMB) Has Announced That It Will Be Increasing Its Dividend To €5.88

The board of Compagnie du Bois Sauvage S.A. (EBR:COMB) has announced that it will be paying its dividend of €5.88 on the 6th of May, an increased payment from last year's comparable dividend. This will take the annual payment to 3.5% of the stock price, which is above what most companies in the industry pay.

Compagnie du Bois Sauvage's Distributions May Be Difficult To Sustain

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Even though Compagnie du Bois Sauvage isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

Over the next year, EPS might fall by 46.0% based on recent performance. While this means that the company will be unprofitable, we generally believe cash flows are more important, and the current cash payout ratio is quite healthy, which gives us comfort.

View our latest analysis for Compagnie du Bois Sauvage

Compagnie du Bois Sauvage Has A Solid Track Record

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 an annual total of €7.28 in 2015 to the most recent total annual payment of €8.40. This means that it has been growing its distributions at 1.4% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Over the past five years, it looks as though Compagnie du Bois Sauvage's EPS has declined at around 46% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think Compagnie du Bois Sauvage is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Compagnie du Bois Sauvage has 2 warning signs (and 1 which is significant) we think you should know about. 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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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.