Acciona (BME:ANA) Is Paying Out A Larger Dividend Than Last Year

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 1.8%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Acciona's stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Acciona

Acciona's Earnings Easily Cover the Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Acciona's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share is forecast to rise by 34.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 43%, 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. 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. 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Acciona hasn't seen much change in its earnings per share over the last five years.

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Acciona (of which 1 is significant!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.