SA Catana Group (EPA:CATG) Is Increasing Its Dividend To €0.18

SA Catana Group (EPA:CATG) will increase its dividend from last year's comparable payment on the 6th of March to €0.18. This makes the dividend yield about the same as the industry average at 3.5%.

See our latest analysis for SA Catana Group

SA Catana Group's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, SA Catana Group was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

EPS is set to fall by 20.3% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 22%, which is comfortable for the company to continue in the future.

SA Catana Group Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2022, the annual payment back then was €0.13, compared to the most recent full-year payment of €0.18. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that SA Catana Group has grown earnings per share at 28% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While SA Catana Group is earning enough to cover the payments, the cash flows are lacking. We don't think SA Catana Group is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, SA Catana Group has 3 warning signs (and 2 which can't be ignored) we think you should know about. 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.