Cementos Molins (BDM:CMO) Is Increasing Its Dividend To €0.2835

Cementos Molins, S.A.'s (BDM:CMO) dividend will be increasing from last year's payment of the same period to €0.2835 on 17th of July. This makes the dividend yield 4.3%, which is above the industry average.

View our latest analysis for Cementos Molins

Cementos Molins' Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Cementos Molins was paying only paying out a fraction of earnings, but the payment was a massive 147% 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.

Over the next year, EPS is forecast to fall by 8.9%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 35%, which is comfortable for the company to continue in the future.

Cementos Molins Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was €0.17, compared to the most recent full-year payment of €0.70. This means that it has been growing its distributions at 15% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

We Could See Cementos Molins' Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Cementos Molins has been growing its earnings per share at 8.3% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Cementos Molins' prospects of growing its dividend payments in the future.

Our Thoughts On Cementos Molins' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Cementos Molins' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Cementos Molins that investors need to be conscious of moving forward. 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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