EURO Ressources (EPA:EUR) Will Pay A Dividend Of €0.25

The board of EURO Ressources S.A. (EPA:EUR) has announced that it will pay a dividend on the 8th of June, with investors receiving €0.25 per share. Based on this payment, the dividend yield on the company's stock will be 8.0%, which is an attractive boost to shareholder returns.

Check out our latest analysis for EURO Ressources

EURO Ressources Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, the company's dividend was higher than its profits, and made up 84% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

If the company can't turn things around, EPS could fall by 5.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 112%, which could put the dividend under pressure if earnings don't start to improve.

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 annual payment during the last 10 years was €0.29 in 2013, and the most recent fiscal year payment was €0.25. This works out to be a decline of approximately 1.5% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that EURO Ressources' earnings per share has fallen at approximately 5.0% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about EURO Ressources' payments, as there could be some issues with sustaining them into the future. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

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. Just as an example, we've come across 3 warning signs for EURO Ressources you should be aware of, and 1 of them is potentially serious. If you are a dividend investor, you might also want to look at our curated list of high yield 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.