Elia Group (EBR:ELI) Will Pay A Larger Dividend Than Last Year At €1.23

Elia Group SA/NV (EBR:ELI) has announced that it will be increasing its dividend on the 1st of June to €1.23. Although the dividend is now higher, the yield is only 1.0%, which is below the industry average.

View our latest analysis for Elia Group

Elia Group's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Elia Group's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 0.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% by next year, which is in a pretty sustainable range.

Elia Group Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from €1.40 in 2012 to the most recent annual payment of €1.75. This implies that the company grew its distributions at a yearly rate of about 2.3% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

We Could See Elia Group's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see Elia Group has been growing its earnings per share at 6.3% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like Elia Group's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Elia Group (1 makes us a bit uncomfortable!) that you should be aware of before investing. 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.