High's (EPA:HCO) Dividend Will Be Increased To €0.32

The board of High Co. SA (EPA:HCO) has announced that it will be increasing its dividend on the 23rd of May to €0.32. This will take the annual payment from 5.7% to 5.7% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for High

High's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, High's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to fall by 15.8%. If recent patterns in the dividend continue, we could see the payout ratio reaching 85% in the next 12 months, which is on the higher end of the range we would say is sustainable.

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. Since 2012, the dividend has gone from €0.10 to €0.32. This means that it has been growing its distributions at 12% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

High Could Grow Its Dividend

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. High has impressed us by growing EPS at 7.9% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Our Thoughts On High's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. Just as an example, we've come across 2 warning signs for High you should be aware of, and 1 of them makes us a bit uncomfortable. Is High not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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