Elia Group (EBR:ELI) Will Pay A Larger Dividend Than Last Year At €1.39

Elia Group SA/NV (EBR:ELI) will increase its dividend from last year's comparable payment on the 3rd of June to €1.39. Despite this raise, the dividend yield of 2.1% is only a modest boost to shareholder returns.

View our latest analysis for Elia Group

Elia Group's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Elia Group was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 35.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 24%, which is in the range that makes us comfortable with the sustainability of the dividend.

Elia Group Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was €1.54, compared to the most recent full-year payment of €1.99. This means that it has been growing its distributions at 2.6% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Unfortunately, Elia Group's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Elia Group's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Elia Group's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

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. Just as an example, we've come across 3 warning signs for Elia Group you should be aware of, and 2 of them are a bit unpleasant. 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.