Cancom's (ETR:COK) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Cancom SE (ETR:COK) has announced that it will be increasing its dividend by 33% on the 1st of July to €1.00. This will take the annual payment from 1.3% to 1.8% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Cancom

Cancom's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Cancom's dividend was only 39% of earnings, however it was paying out 110% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS is forecast to expand by 58.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% by next year, which is in a pretty sustainable range.

Cancom Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The first annual payment during the last 10 years was €0.15 in 2012, and the most recent fiscal year payment was €0.75. This means that it has been growing its distributions at 17% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Cancom has been growing its earnings per share at 14% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Cancom's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Cancom's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Cancom is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Cancom you should be aware of, and 1 of them makes us a bit uncomfortable. 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.