Nexans' (EPA:NEX) Upcoming Dividend Will Be Larger Than Last Year's

Nexans S.A. (EPA:NEX) has announced that it will be increasing its dividend from last year's comparable payment on the 23rd of May to €2.30. This makes the dividend yield 2.3%, which is above the industry average.

View our latest analysis for Nexans

Nexans' Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Nexans' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 66.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% by next year, which is in a pretty sustainable range.

Nexans' Dividend Has Lacked Consistency

Nexans has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of €0.50 in 2017 to the most recent total annual payment of €2.30. This means that it has been growing its distributions at 24% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Nexans has grown earnings per share at 73% per year over the past five years. Nexans is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Nexans Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Nexans is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. For instance, we've picked out 1 warning sign for Nexans that investors should take into consideration. 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.