EURO Ressources (EPA:EUR) Has Announced That It Will Be Increasing Its Dividend To €0.25

EURO Ressources S.A. (EPA:EUR) will increase its dividend on the 10th of June to €0.25. This will take the annual payment from 7.3% to 7.3% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for EURO Ressources

EURO Ressources Doesn't Earn Enough To Cover Its Payments

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

If the company can't turn things around, EPS could fall by 4.8% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 146%, which is definitely a bit high to be sustainable going forward.

EURO Ressources' Dividend Has Lacked Consistency

Looking back, EURO Ressources' dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2012, the first annual payment was €0.29, compared to the most recent full-year payment of €0.25. Doing the maths, this is a decline of about 1.6% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though EURO Ressources' EPS has declined at around 4.8% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

EURO Ressources' Dividend Doesn't Look Great

In summary, investors will like to be receiving a higher dividend, but we have some questions about whether it can be sustained over the long term. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for EURO Ressources (1 makes us a bit uncomfortable!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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