Veolia Environnement (EPA:VIE) Is Paying Out A Larger Dividend Than Last Year

Veolia Environnement SA's (EPA:VIE) dividend will be increasing from last year's payment of the same period to €1.25 on 10th of May. Based on this payment, the dividend yield for the company will be 4.2%, which is fairly typical for the industry.

See our latest analysis for Veolia Environnement

Veolia Environnement's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before this announcement, Veolia Environnement was paying out 92% of earnings, but a comparatively small 48% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 76.9% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 55% which brings it into quite a comfortable range.

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 €0.70 in 2014, and the most recent fiscal year payment was €1.25. This means that it has been growing its distributions at 6.0% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Veolia Environnement Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Veolia Environnement has seen EPS rising for the last five years, at 12% per annum. 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.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Veolia Environnement will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Veolia Environnement (of which 1 is a bit concerning!) 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.