Rexel's (EPA:RXL) Dividend Will Be €1.20

Rexel S.A.'s (EPA:RXL) investors are due to receive a payment of €1.20 per share on 16th of May. Based on this payment, the dividend yield will be 4.5%, which is fairly typical for the industry.

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Rexel's Projected Earnings Seem Likely To Cover Future Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, the company was paying out 106% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 48%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

The next year is set to see EPS grow by 164.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 43%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

View our latest analysis for Rexel

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of €0.75 in 2015 to the most recent total annual payment of €1.20. This works out to be a compound annual growth rate (CAGR) of approximately 4.8% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth Could Be Constrained

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Rexel has seen EPS rising for the last five years, at 11% per annum. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

Our Thoughts On Rexel's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Rexel is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 4 warning signs for Rexel that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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