Rexel (EPA:RXL) Is Paying Out A Dividend Of €1.20

The board of Rexel S.A. (EPA:RXL) has announced that it will pay a dividend on the 17th of May, with investors receiving €1.20 per share. This means that the annual payment will be 4.9% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Rexel

Rexel's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last dividend was quite easily covered by Rexel's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 6.1%. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was €0.75, compared to the most recent full-year payment of €1.20. This means that it has been growing its distributions at 4.8% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Rexel has grown earnings per share at 42% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

We Really Like Rexel's Dividend

Overall, we like to see the dividend staying consistent, and we think Rexel might even raise payments in the future. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Rexel that investors should know about before committing capital to this stock. 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.