Solvay (EBR:SOLB) Will Pay A Dividend Of €0.679

The board of Solvay SA ( EBR:SOLB ) has announced that it will pay a dividend on the 22nd of January, with investors receiving €0.679 per share. This means the annual payment is 5.8% of the current stock price, which is above the average for the industry.

View our latest analysis for Solvay

Solvay's Future Dividends May Potentially Be At Risk

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Even while not generating a profit, Solvay is paying out most of its free cash flows as a dividend. Generally it is unsustainable for a company to be paying a dividend while unprofitable, and with limited reinvestment into the business growth may be slow.

Over the next year, EPS is forecast to expand by 182.7%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

Dividend Volatility

While the company has been paying a dividend for a long time, shareholders can appreciate that the dividend has been stable or growing over this time. While you may notice that since 2015, the dividend has gone from €3.20 total annually to €1.78. This is not technically a dividend that has shrunk owing to the demerger of Syensqo. The dividend paid by Syensqo more than makes up for the reduced dividend in Solvay.

The Company Could Face Some Challenges Growing The Dividend

We are encouraged to see that Solvay has grown earnings per share at 26% per year over the past five years. While the company is not yet turning a profit, it is growing at a good rate. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.

Solvay's Dividend Doesn't Look Sustainable

Overall, it's great to see Solvay's dividends growing steadily over the years. Strong earnings growth means Solvay has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Thankfully Solvay has been very consistent when you account for the recent demerger. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across  2 warning signs for Solvay you should be aware of, and 1 of them is potentially serious. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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