Iberdrola (BME:IBE) Has Announced A Dividend Of €0.2033

Iberdrola, S.A.'s (BME:IBE) investors are due to receive a payment of €0.2033 per share on 26th of January. Based on this payment, the dividend yield for the company will be 3.7%, which is fairly typical for the industry.

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Iberdrola's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Iberdrola was paying out quite a large proportion of both earnings and cash flow, with the dividend being 109% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Looking forward, earnings per share is forecast to rise by 40.9% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 56% which would be quite comfortable going to take the dividend forward.

Check out our latest analysis for Iberdrola

Iberdrola Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from €0.03 total annually to €0.659. This means that it has been growing its distributions at 36% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Iberdrola has seen EPS rising for the last five years, at 8.1% per annum. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Our Thoughts On Iberdrola's Dividend

Overall, we always like to see the dividend being raised, but we don't think Iberdrola will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think Iberdrola is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Iberdrola that you should be aware of before investing. 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.