Getlink's (EPA:GET) Shareholders Will Receive A Bigger Dividend Than Last Year

Getlink SE (EPA:GET) will increase its dividend from last year's comparable payment on the 5th of June to €0.55. This makes the dividend yield about the same as the industry average at 3.6%.

View our latest analysis for Getlink

Getlink Is Paying Out More Than It Is Earning

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last payment made up 91% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to fall by 11.0%. If the dividend continues along recent trends, we estimate the payout ratio could reach 109%, which could put the dividend in jeopardy if the company's earnings don't 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 €0.12 in 2014, and the most recent fiscal year payment was €0.55. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Getlink Might Find It Hard To Grow Its Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Getlink has grown earnings per share at 20% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Our Thoughts On Getlink's Dividend

Overall, we always like to see the dividend being raised, but we don't think Getlink will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Getlink you should be aware of, and 2 of them don't sit too well with us. Is Getlink not quite the opportunity you were looking for? Why not check out our selection of top 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.