Rémy Cointreau (EPA:RCO) Is Reducing Its Dividend To €1.50

Rémy Cointreau SA (EPA:RCO) has announced that on 1st of October, it will be paying a dividend of€1.50, which a reduction from last year's comparable dividend. The dividend yield will be in the average range for the industry at 2.8%.

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Rémy Cointreau's Future Dividend Projections Appear Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last dividend, Rémy Cointreau is earning enough to cover the payment, but then it makes up 405% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS is forecast to expand by 19.7%. If the dividend continues on this path, the payout ratio could be 55% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Rémy Cointreau

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of €1.27 in 2015 to the most recent total annual payment of €1.50. This implies that the company grew its distributions at a yearly rate of about 1.7% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Rémy Cointreau hasn't seen much change in its earnings per share over the last five years. Growth of 1.7% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Rémy Cointreau that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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