Abéo's (EPA:ABEO) Dividend Will Be Reduced To €0.20

Abéo SA's (EPA:ABEO) dividend is being reduced from last year's payment covering the same period to €0.20 on the 31st of July. Based on this payment, the dividend yield will be 1.9%, which is lower than the average for the industry.

View our latest analysis for Abéo

Abéo's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. The last dividend was quite easily covered by Abéo's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

EPS is set to fall by 18.5% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 73%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Abéo's Dividend Has Lacked Consistency

It's comforting to see that Abéo has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of €0.48 in 2017 to the most recent total annual payment of €0.20. This works out to a decline of approximately 58% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Abéo's earnings per share has shrunk at 19% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Our Thoughts On Abéo's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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 Abéo 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 5 warning signs for Abéo that you should be aware of before investing. Is Abéo not quite the opportunity you were looking for? Why not check out our selection of top 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.

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