Euronext (EPA:ENX) Is Increasing Its Dividend To €1.93

The board of Euronext N.V. (EPA:ENX) has announced that it will be increasing its dividend on the 25th of May to €1.93. Although the dividend is now higher, the yield is only 2.4%, which is below the industry average.

Check out our latest analysis for Euronext

Euronext's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Euronext's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 2.9%. If the dividend continues on this path, the payout ratio could be 46% by next year, which we think can be pretty sustainable going forward.

Euronext Doesn't Have A Long Payment History

It is great to see that Euronext has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from €0.84 in 2015 to the most recent annual payment of €1.93. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Euronext has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

We Could See Euronext's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Euronext has impressed us by growing EPS at 9.2% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like Euronext's Dividend

Overall, a dividend increase is always good, and we think that Euronext is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 2 warning signs for Euronext that you should be aware of before investing. 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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