Acciona (BME:ANA) Has Announced That It Will Be Increasing Its Dividend To €3.32

The board of Acciona, S.A. (BME:ANA) has announced that it will be increasing its dividend on the 7th of July to €3.32. Even though the dividend went up, the yield is still quite low at only 1.9%.

View our latest analysis for Acciona

Acciona's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Acciona was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Over the next year, EPS is forecast to expand by 35.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 43% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was €3.00 in 2012, and the most recent fiscal year payment was €4.10. This implies that the company grew its distributions at a yearly rate of about 3.2% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, Acciona's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Acciona will make a great income stock. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Acciona is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Acciona (of which 1 can't be ignored!) 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.