Hellenic Exchanges - Athens Stock Exchange (ATH:EXAE) Is Increasing Its Dividend To €0.24

Hellenic Exchanges - Athens Stock Exchange S.A.'s (ATH:EXAE) periodic dividend will be increasing on the 1st of July to €0.24, with investors receiving 53% more than last year's €0.156. This will take the dividend yield to an attractive 3.2%, providing a nice boost to shareholder returns.

View our latest analysis for Hellenic Exchanges - Athens Stock Exchange

Hellenic Exchanges - Athens Stock Exchange's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. At the time of the last dividend payment, Hellenic Exchanges - Athens Stock Exchange was paying out a very large proportion of what it was earning and 104% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Over the next year, EPS is forecast to expand by 59.9%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 79% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut 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 €0.156. This implies that the company grew its distributions at a yearly rate of about 2.7% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth Could Be Constrained

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Hellenic Exchanges - Athens Stock Exchange has seen EPS rising for the last five years, at 29% per annum. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Hellenic Exchanges - Athens Stock Exchange hasn't been doing.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Hellenic Exchanges - Athens Stock Exchange's payments are rock solid. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Hellenic Exchanges - Athens Stock Exchange that investors should know about before committing capital to this stock. Is Hellenic Exchanges - Athens Stock Exchange not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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