Iberdrola (BME:IBE) Is Increasing Its Dividend To €0.26

Iberdrola, S.A. (BME:IBE) will increase its dividend from last year's comparable payment on the 23rd of January to €0.26. This makes the dividend yield about the same as the industry average at 4.3%.

See our latest analysis for Iberdrola

Iberdrola's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite easily covered by Iberdrola's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 13.6%. If the dividend continues on this path, the payout ratio could be 74% by next year, which we think can be pretty sustainable going forward.

Iberdrola Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was €0.03 in 2014, and the most recent fiscal year payment was €0.516. This implies that the company grew its distributions at a yearly rate of about 33% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Iberdrola has been growing its earnings per share at 14% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like Iberdrola's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Iberdrola that investors should take into consideration. 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.