Ebro Foods' (BME:EBRO) Shareholders Will Receive A Bigger Dividend Than Last Year

Ebro Foods, S.A.'s (BME:EBRO) dividend will be increasing from last year's payment of the same period to €0.1863 on 1st of April. This will take the dividend yield to an attractive 4.1%, providing a nice boost to shareholder returns.

Check out our latest analysis for Ebro Foods

Ebro Foods' Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Ebro Foods was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 5.5%. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was €0.50, compared to the most recent full-year payment of €0.66. This implies that the company grew its distributions at a yearly rate of about 2.8% over that duration. 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. The company has been growing at a pretty soft per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Ebro Foods' Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Ebro Foods (of which 1 is significant!) you should know about. 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.