Eurazeo (EPA:RF) Will Pay A Larger Dividend Than Last Year At €2.65

The board of Eurazeo SE (EPA:RF) has announced that it will be paying its dividend of €2.65 on the 28th of May, an increased payment from last year's comparable dividend. This makes the dividend yield 4.1%, which is above the industry average.

Our free stock report includes 1 warning sign investors should be aware of before investing in Eurazeo. Read for free now.

Eurazeo's Future Dividend Projections Seem Positive

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

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was €0.896 in 2015, and the most recent fiscal year payment was €2.65. This means that it has been growing its distributions at 11% per annum over that time. Eurazeo has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Company Could Face Some Challenges Growing The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Eurazeo has been growing its earnings per share at 19% a year over the past five years. It's not great that the company is not turning a profit, but the decent growth in recent years is certainly a positive sign. If the company can become profitable soon, continuing on this trajectory would bode well for the future of the dividend.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Eurazeo's payments are rock solid. Strong earnings growth means Eurazeo has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Eurazeo that you should be aware of before investing. Is Eurazeo not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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