Électricite de Strasbourg Société Anonyme's (EPA:ELEC) Dividend Will Be Increased To €5.80

Électricite de Strasbourg Société Anonyme's (EPA:ELEC) dividend will be increasing on the 1st of June to €5.80, with investors receiving 23% more than last year. This will take the dividend yield from 4.3% to 5.2%, providing a nice boost to shareholder returns.

See our latest analysis for Électricite de Strasbourg Société Anonyme

Électricite de Strasbourg Société Anonyme Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Électricite de Strasbourg Société Anonyme's dividend made up quite a large proportion of earnings but only 47% of free cash flows. This leaves plenty of cash for reinvestment into the business.

If the company can't turn things around, EPS could fall by 5.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 99%, which could put the dividend in jeopardy if the company's earnings don't improve.

Électricite de Strasbourg Société Anonyme's Track Record Isn't Great

The company hasn't been particularly volatile, but it has been steadily decreasing which of course is not what investors like to see. The dividend has gone from €5.90 in 2012 to the most recent annual payment of €4.70. This works out to be a decline of approximately 2.2% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Is Doubtful

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 Électricite de Strasbourg Société Anonyme's EPS has declined at around 5.5% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Électricite de Strasbourg Société Anonyme's payments are rock solid. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 Électricite de Strasbourg Société Anonyme you should be aware of, and 1 of them can't be ignored. Is Électricite de Strasbourg Société Anonyme 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.