Synergie's (EPA:SDG) Dividend Will Be €0.80

The board of Synergie SE (EPA:SDG) has announced that it will pay a dividend of €0.80 per share on the 1st of July. This means the annual payment is 2.2% of the current stock price, which is above the average for the industry.

View our latest analysis for Synergie

Synergie's Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Synergie was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 24.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was €0.30 in 2012, and the most recent fiscal year payment was €0.80. This means that it has been growing its distributions at 10% per annum over that time. Synergie has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth May Be Hard To Achieve

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. Earnings has been rising at 3.4% per annum over the last five years, which admittedly is a bit slow. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

Overall, a consistent dividend is a good thing, and we think that Synergie has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Synergie that investors need to be conscious of moving forward. Is Synergie not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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