Iberdrola, S.A.'s (BME:IBE) dividend will be increasing from last year's payment of the same period to €0.2818 on 17th of July. This takes the annual payment to 4.5% of the current stock price, which is about average for the industry.
View our latest analysis for Iberdrola
Iberdrola's Earnings Easily Cover The Distributions
Solid dividend yields are great, but they only really help us if the payment is sustainable. The last payment was quite easily covered by earnings, but it made up 101% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.
EPS is set to fall by 4.7% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 61%, which we are pretty comfortable with and we think is feasible on an earnings basis.
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 €0.55. This implies that the company grew its distributions at a yearly rate of about 34% 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. We are encouraged to see that Iberdrola has grown earnings per share at 15% 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.
In Summary
Overall, we always like to see the dividend being raised, but we don't think Iberdrola will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Iberdrola has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. 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.
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About BME:IBE
Iberdrola
Engages in the generation, transmission, distribution, and supply of electricity in Spain, the United Kingdom, the United States, Mexico, Brazil, Germany, France, and Australia.
Solid track record with mediocre balance sheet.
