Neurones (EPA:NRO) Will Pay A Smaller Dividend Than Last Year

Neurones S.A. (EPA:NRO) has announced it will be reducing its dividend payable on the 10th of June to €1.00. However, the dividend yield of 2.8% is still a decent boost to shareholder returns.

See our latest analysis for Neurones

Neurones' Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Neurones' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Earnings per share is forecast to rise by 12.6% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 87%. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Neurones Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from €0.06 to €1.00. This implies that the company grew its distributions at a yearly rate of about 32% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

We Could See Neurones' Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Neurones has grown earnings per share at 8.4% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like Neurones' Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Neurones does. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 3 Neurones analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.