Savencia SA's (EPA:SAVE) investors are due to receive a payment of €1.50 per share on 18th of May. This means the annual payment will be 2.3% of the current stock price, which is lower than the industry average.
Check out our latest analysis for Savencia
Savencia's Earnings Easily Cover the Distributions
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Savencia was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
EPS is set to fall by 21.1% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 33%, 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
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 €1.20 in 2012 to the most recent annual payment of €1.50. This means that it has been growing its distributions at 2.3% per annum over that time. 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.
Savencia May Find It Hard To Grow 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 not great to see that Savencia's earnings per share has fallen at approximately 4.2% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.
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. For example, we've picked out 1 warning sign for Savencia that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
