Ebro Foods (BME:EBRO) Has Announced A Dividend Of €0.1782

The board of Ebro Foods, S.A. (BME:EBRO) has announced that it will pay a dividend on the 28th of June, with investors receiving €0.1782 per share. This takes the dividend yield to 4.1%, which shareholders will be pleased with.

View our latest analysis for Ebro Foods

Ebro Foods' Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Ebro Foods was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 5.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was €0.60, compared to the most recent full-year payment of €0.66. 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.

Ebro Foods May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Growth of per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in 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. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Ebro Foods that investors should know about before committing capital to this stock. 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.