Wendel (EPA:MF) Is Increasing Its Dividend To €3.20

Wendel (EPA:MF) has announced that it will be increasing its dividend from last year's comparable payment on the 21st of June to €3.20. This makes the dividend yield about the same as the industry average at 3.2%.

View our latest analysis for Wendel

Wendel's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Wendel's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 28%, which is in a comfortable range for us.

Wendel Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was €1.75 in 2013, and the most recent fiscal year payment was €3.20. This implies that the company grew its distributions at a yearly rate of about 6.2% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Wendel's Dividend Might Lack Growth

The company's investors will be pleased to have been receiving dividend income for some time. Wendel has impressed us by growing EPS at 63% per year over the past five years. While EPS is growing rapidly, Wendel paid out a very high 195% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Wendel's payments are rock solid. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.

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. For instance, we've picked out 3 warning signs for Wendel that investors should take into consideration. 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.