L.D.C's (EPA:LOUP) Dividend Is Being Reduced To €1.55

L.D.C. S.A. (EPA:LOUP) has announced that on 28th of August, it will be paying a dividend of€1.55, which a reduction from last year's comparable dividend. This means that the annual payment is 1.7% of the current stock price, which is lower than what the rest of the industry is paying.

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L.D.C's Projected Earnings Seem Likely To Cover Future Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, L.D.C's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 24.7%. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for L.D.C

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was €0.575, compared to the most recent full-year payment of €1.55. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. L.D.C has seen EPS rising for the last five years, at 11% per annum. L.D.C definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like L.D.C's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like L.D.C does. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 5 L.D.C analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is L.D.C 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.