ecotel communication ag's (ETR:E4C) Shareholders Will Receive A Bigger Dividend Than Last Year

ecotel communication ag's (ETR:E4C) dividend will be increasing to €2.25 on 13th of July. This makes the dividend yield 7.8%, which is above the industry average.

Check out our latest analysis for ecotel communication ag

ecotel communication ag Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by ecotel communication ag's earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 34.3%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 128%, which probably can't continue putting some pressure on the balance sheet.

ecotel communication ag's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from €0.16 in 2015 to the most recent annual payment of €0.70. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. ecotel communication ag has seen EPS rising for the last five years, at 42% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that ecotel communication ag could prove to be a strong dividend payer.

We Really Like ecotel communication ag's Dividend

Overall, a dividend increase is always good, and we think that ecotel communication ag is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for ecotel communication ag 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.