Fluxys Belgium's (EBR:FLUX) Upcoming Dividend Will Be Larger Than Last Year's

The board of Fluxys Belgium SA (EBR:FLUX) has announced that it will be increasing its dividend on the 18th of May to €0.97. Although the dividend is now higher, the yield is only 3.1%, which is below the industry average.

Check out our latest analysis for Fluxys Belgium

Fluxys Belgium's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, the company was paying out 128% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 61%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Over the next year, EPS could expand by 9.3% if the company continues along the path it has been on recently. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 84%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2012, the first annual payment was €2.88, compared to the most recent full-year payment of €1.38. This works out to be a decline of approximately 7.1% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

There Isn't Much Room To Grow The Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Fluxys Belgium has impressed us by growing EPS at 9.3% per year over the past five years. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

In Summary

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 is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Fluxys Belgium (of which 1 is a bit unpleasant!) you should know about. 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.