Repsol (BME:REP) Will Pay A Larger Dividend Than Last Year At €0.324

Repsol, S.A.'s (BME:REP) dividend will be increasing from last year's payment of the same period to €0.324 on 11th of January. This takes the annual payment to 5.3% of the current stock price, which is about average for the industry.

See our latest analysis for Repsol

Repsol's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, Repsol's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 4.1%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 21%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the dividend has gone from €0.958 total annually to €0.75. This works out to be a decline of approximately 2.4% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Repsol has seen EPS rising for the last five years, at 18% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Repsol's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Repsol (of which 1 doesn't sit too well with us!) you should know about. 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.