Eurazeo (EPA:RF) Is Increasing Its Dividend To €2.65

Eurazeo SE's (EPA:RF) dividend will be increasing from last year's payment of the same period to €2.65 on 28th of May. This will take the annual payment to 3.9% of the stock price, which is above what most companies in the industry pay.

We've discovered 1 warning sign about Eurazeo. View them for free.

Estimates Indicate Eurazeo's Dividend Coverage Likely To Improve

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Eurazeo isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. This is quite a strong warning sign that the dividend may not be sustainable.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 16%, so there isn't too much pressure on the dividend.

View our latest analysis for Eurazeo

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of €0.94 in 2015 to the most recent total annual payment of €2.65. This means that it has been growing its distributions at 11% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Company Could Face Some Challenges Growing The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Eurazeo has seen EPS rising for the last five years, at 19% per annum. It's not an ideal situation that the company isn't turning a profit but the growth recently is a positive sign. All is not lost, but the future of the dividend definitely rests upon the company's ability to become profitable soon.

Eurazeo's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Eurazeo will make a great income stock. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Eurazeo that investors need to be conscious of moving forward. 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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