Acciona, S.A. (BME:ANA) will increase its dividend from last year's comparable payment on the 6th of July to €3.65. Despite this raise, the dividend yield of 2.9% is only a modest boost to shareholder returns.
See our latest analysis for Acciona
Acciona's Earnings Easily Cover The Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Acciona was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
Over the next year, EPS is forecast to expand by 21.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the dividend has gone from €2.87 total annually to €4.50. This works out to be a compound annual growth rate (CAGR) of approximately 4.6% a year over that time. 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.
The Dividend Looks Likely To Grow
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Acciona has impressed us by growing EPS at 16% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.
Our Thoughts On Acciona's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Acciona's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.
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. Taking the debate a bit further, we've identified 2 warning signs for Acciona that investors need to be conscious of moving forward. Is Acciona 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.
About BME:ANA
Acciona
Engages in the energy, infrastructure, and other businesses in Spain and internationally.
Slight with limited growth.
