Edenred (EPA:EDEN) Will Pay A Larger Dividend Than Last Year At €1.10

The board of Edenred SE (EPA:EDEN) has announced that the dividend on 12th of June will be increased to €1.10, which will be 10% higher than last year's payment of €1.00 which covered the same period. Although the dividend is now higher, the yield is only 2.1%, which is below the industry average.

See our latest analysis for Edenred

Edenred'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 Edenred's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 166.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was €0.82, compared to the most recent full-year payment of €1.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.0% 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.

Edenred May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Edenred hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Edenred's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Edenred's payments are rock solid. 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. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 4 warning signs for Edenred you should be aware of, and 1 of them is a bit concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.