Fluxys Belgium (EBR:FLUX) Is Increasing Its Dividend To €0.98

Fluxys Belgium SA (EBR:FLUX) has announced that it will be increasing its dividend from last year's comparable payment on the 17th of May to €0.98. Even though the dividend went up, the yield is still quite low at only 4.9%.

Check out our latest analysis for Fluxys Belgium

Fluxys Belgium'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. Based on the last payment, Fluxys Belgium's profits didn't cover the dividend, but the company was generating enough cash instead. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

EPS is set to grow by 3.6% over the next year if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 82%, which is on the higher side, but certainly still feasible.

Fluxys Belgium Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of €1.60 in 2013 to the most recent total annual payment of €1.40. The dividend has shrunk at around 1.3% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Fluxys Belgium May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 3.6% per annum over the last five years, which admittedly is a bit slow. The earnings growth is anaemic, and the company is paying out 117% of its profit. Limited recent earnings growth and a high payout ratio makes it hard for us to envision strong future dividend growth, unless the company should have substantial pricing power or some form of competitive advantage.

Our Thoughts On Fluxys Belgium's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Fluxys Belgium's payments are rock solid. 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. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 3 warning signs for Fluxys Belgium that you should be aware of before investing. Is Fluxys Belgium 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.