There's A Lot To Like About EssoF's (EPA:ES) Upcoming €2.00 Dividend

Esso S.A.F. (EPA:ES) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase EssoF's shares before the 10th of July to receive the dividend, which will be paid on the 12th of July.

The company's next dividend payment will be €2.00 per share. Last year, in total, the company distributed €2.00 to shareholders. Based on the last year's worth of payments, EssoF stock has a trailing yield of around 3.9% on the current share price of €50.65. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether EssoF can afford its dividend, and if the dividend could grow.

View our latest analysis for EssoF

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. EssoF is paying out just 3.6% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. EssoF paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Click here to see how much of its profit EssoF paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see EssoF has grown its earnings rapidly, up 35% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. EssoF's dividend payments are broadly unchanged compared to where they were 10 years ago.

To Sum It Up

Has EssoF got what it takes to maintain its dividend payments? Companies like EssoF that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, EssoF appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

On that note, you'll want to research what risks EssoF is facing. To help with this, we've discovered 2 warning signs for EssoF (1 is concerning!) that you ought to be aware of before buying the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.