Wendel (EPA:MF) Is Increasing Its Dividend To €4.70

The board of Wendel (EPA:MF) has announced that the dividend on 23rd of May will be increased to €4.70, which will be 18% higher than last year's payment of €4.00 which covered the same period. This will take the dividend yield to an attractive 4.8%, providing a nice boost to shareholder returns.

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Estimates Indicate Wendel's Dividend Coverage Likely To Improve

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Even though Wendel isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 5.8%, which makes us pretty comfortable with the sustainability of the dividend.

View our latest analysis for Wendel

Wendel Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was €1.85 in 2015, and the most recent fiscal year payment was €4.00. This implies that the company grew its distributions at a yearly rate of about 8.0% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. It's not great to see that Wendel's earnings per share has fallen at approximately 9.4% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On Wendel's Dividend

Overall, we always like to see the dividend being raised, but we don't think Wendel will make a great income stock. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. 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. As an example, we've identified 1 warning sign for Wendel that you should be aware of before investing. Is Wendel 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.