Compagnie de Chemins de Fer Départementaux Société Anonyme (EPA:MLCFD) Has Announced That It Will Be Increasing Its Dividend To €35.00

Compagnie de Chemins de Fer Départementaux Société Anonyme (EPA:MLCFD) will increase its dividend from last year's comparable payment on the 4th of July to €35.00. This takes the dividend yield to 4.0%, which shareholders will be pleased with.

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Estimates Indicate Compagnie de Chemins de Fer Départementaux Société Anonyme's Could Struggle to Maintain Dividend Payments In The Future

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Compagnie de Chemins de Fer Départementaux Société Anonyme's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

If the company can't turn things around, EPS could fall by 4.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 187%, which could put the dividend in jeopardy if the company's earnings don't improve.

View our latest analysis for Compagnie de Chemins de Fer Départementaux Société Anonyme

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was €18.00, compared to the most recent full-year payment of €35.00. This implies that the company grew its distributions at a yearly rate of about 6.9% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth May Be Hard To Achieve

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. Compagnie de Chemins de Fer Départementaux Société Anonyme has seen earnings per share falling at 4.7% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Compagnie de Chemins de Fer Départementaux Société Anonyme's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Compagnie de Chemins de Fer Départementaux Société Anonyme is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for Compagnie de Chemins de Fer Départementaux Société Anonyme (1 makes us a bit uncomfortable!) 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.