Repsol (BME:REP) Has Announced A Dividend Of €0.3848

The board of Repsol, S.A. (BME:REP) has announced that it will pay a dividend of €0.3848 per share on the 14th of January. This will take the dividend yield to an attractive 8.4%, providing a nice boost to shareholder returns.

Check out our latest analysis for Repsol

Repsol's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Repsol was paying only paying out a fraction of earnings, but the payment was a massive 349% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

EPS is set to fall by 0.9% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 28%, which is comfortable for the company to continue in the future.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of €0.962 in 2014 to the most recent total annual payment of €0.975. Dividend payments have been growing, but very slowly over the period. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Repsol has grown earnings per share at 20% per year over the past five years. Repsol definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Repsol's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Repsol'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 Repsol is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Repsol (of which 1 is a bit unpleasant!) you should know about. Is Repsol not quite the opportunity you were looking for? Why not check out our selection of top 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.