ERAMET (EPA:ERA) Is Paying Out Less In Dividends Than Last Year

ERAMET S.A. (EPA:ERA) has announced that on 6th of June, it will be paying a dividend of€1.50, which a reduction from last year's comparable dividend. This means that the dividend yield is 2.0%, which is a bit low when comparing to other companies in the industry.

See our latest analysis for ERAMET

ERAMET's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, ERAMET was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 8.3%, so there isn't too much pressure on the dividend.

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 an annual total of €1.30 in 2014 to the most recent total annual payment of €1.50. This implies that the company grew its distributions at a yearly rate of about 1.4% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

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. ERAMET has seen EPS rising for the last five years, at 13% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On ERAMET's Dividend

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. We don't think ERAMET is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, ERAMET has 4 warning signs (and 1 which can't be ignored) we think you should know about. 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.