Solvay's (EBR:SOLB) Dividend Will Be €0.679

Solvay SA's (EBR:SOLB) investors are due to receive a payment of €0.679 per share on 22nd of January. The dividend yield of 5.8% is still a nice boost to shareholder returns, despite the cut.

View our latest analysis for Solvay

Solvay's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Solvay's Could Struggle to Maintain Dividend Payments In The Future

Solvay's Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it can't be sustained. Solvay is not generating a profit, and despite this is paying out most of its free cash flow 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.

Earnings per share is forecast to rise by 183.0% over the next year. 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

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was €3.20 in 2014, and the most recent fiscal year payment was €1.78. Doing the maths, this is a decline of about 5.7% per year. 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.

The Company Could Face Some Challenges Growing 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. We are encouraged to see that Solvay has grown earnings per share at 26% per year over the past five years. The company hasn't been turning a profit, but it running in the right direction. If the company can turn a profit relatively soon, we can see this becoming a reliable income stock.

Solvay's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Solvay (1 is significant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.