Wendel's (EPA:MF) Dividend Will Be Increased To €3.20

The board of Wendel (EPA:MF) has announced that it will be paying its dividend of €3.20 on the 21st of June, an increased payment from last year's comparable dividend. This takes the annual payment to 3.2% of the current stock price, which is about average for the industry.

See our latest analysis for Wendel

Wendel's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Wendel's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

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 means that it has been growing its distributions at 6.2% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Wendel Might Find It Hard To Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Wendel has grown earnings per share 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.

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 has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think Wendel 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. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Wendel that investors need to be conscious of moving forward. 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.