Ebro Foods' (BME:EBRO) Dividend Will Be €0.1782

The board of Ebro Foods, S.A. (BME:EBRO) has announced that it will pay a dividend of €0.1782 per share on the 1st of October. This takes the dividend yield to 4.2%, which shareholders will be pleased with.

See our latest analysis for Ebro Foods

Ebro Foods' Earnings Easily Cover The Distributions

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 Ebro Foods' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 5.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 41% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of €0.60 in 2014 to the most recent total annual payment of €0.66. Dividend payments have grown at less than 1% a year over this period. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth May Be Hard To Achieve

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. Growth of may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. Taking the debate a bit further, we've identified 1 warning sign for Ebro Foods that investors need to be conscious of moving forward. Is Ebro Foods 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.

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