The board of Savencia SA (EPA:SAVE) has announced that it will pay a dividend of €1.50 per share on the 18th of May. This payment means the dividend yield will be 2.5%, which is below the average for the industry.
Check out our latest analysis for Savencia
Savencia's Payment Has Solid Earnings Coverage
If it is predictable over a long period, even low dividend yields can be attractive. However, Savencia's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to fall by 23.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 34%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from €1.60 in 2012 to the most recent annual payment of €1.50. Payments have been decreasing at a very slow pace in this time period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Savencia May Find It Hard To Grow The Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that Savencia's earnings per share has fallen at approximately 4.2% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.
Our Thoughts On Savencia's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Savencia's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Savencia that investors should know about before committing capital to this stock. Is Savencia 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.
About ENXTPA:SAVE
Savencia
Produces, distributes, and markets dairy and cheese products in France, rest of Europe, and internationally.
Flawless balance sheet, undervalued and pays a dividend.
