Veolia Environnement (EPA:VIE) Has Announced That It Will Be Increasing Its Dividend To €1.40

The board of Veolia Environnement SA (EPA:VIE) has announced that it will be paying its dividend of €1.40 on the 14th of May, an increased payment from last year's comparable dividend. This takes the annual payment to 4.4% of the current stock price, which is about average for the industry.

See our latest analysis for Veolia Environnement

Veolia Environnement's Projected Earnings Seem Likely To Cover Future Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last payment made up 84% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 51.4%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 59% which would be quite comfortable going to take the dividend forward.

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Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was €0.70, compared to the most recent full-year payment of €1.40. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend's Growth Prospects Are Limited

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. Earnings per share has been crawling upwards at 4.5% per year. Veolia Environnement's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

Our Thoughts On Veolia Environnement's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Veolia Environnement's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Veolia Environnement has 2 warning signs (and 1 which is concerning) we think you should know about. Is Veolia Environnement 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.