Enagás (BME:ENG) Has Announced A Dividend Of €0.324

Enagás, S.A.'s (BME:ENG) investors are due to receive a payment of €0.324 per share on 23rd of December. This means the annual payment is 7.1% of the current stock price, which is above the average for the industry.

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Enagás' Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Enagás' Could Struggle to Maintain Dividend Payments In The Future

Enagás' Future Dividends May Potentially Be At Risk

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Enagás isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. This makes us feel that the dividend will be hard to maintain.

Earnings per share is forecast to rise by 138.2% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 170%, which is a bit high and could start applying pressure to the balance sheet.

View our latest analysis for Enagás

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of €1.30 in 2015 to the most recent total annual payment of €1.00. This works out to be a decline of approximately 2.6% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Enagás' EPS has fallen by approximately 44% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

We're Not Big Fans Of Enagás' Dividend

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. We don't think that this is a great candidate to be an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Enagás that investors should take into consideration. Is Enagás 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.