Hellenic Exchanges - Athens Stock Exchange (ATH:EXAE) Is Increasing Its Dividend To €0.29

Hellenic Exchanges - Athens Stock Exchange S.A. (ATH:EXAE) has announced that it will be increasing its periodic dividend on the 30th of June to €0.29, which will be 16% higher than last year's comparable payment amount of €0.25. This takes the dividend yield to 4.6%, which shareholders will be pleased with.

We've discovered 1 warning sign about Hellenic Exchanges - Athens Stock Exchange. View them for free.

Hellenic Exchanges - Athens Stock Exchange's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend made up a very large portion of earnings and also represented 95% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

Earnings per share is forecast to rise by 36.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 75%, which is on the higher side, but certainly still feasible.

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Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of €0.20 in 2015 to the most recent total annual payment of €0.25. This implies that the company grew its distributions at a yearly rate of about 2.3% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Hellenic Exchanges - Athens Stock Exchange's Dividend Might Lack Growth

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Hellenic Exchanges - Athens Stock Exchange has grown earnings per share at 24% per year over the past five years. 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.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. Strong earnings growth means Hellenic Exchanges - Athens Stock Exchange has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Hellenic Exchanges - Athens Stock Exchange that investors need to be conscious of moving forward. 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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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.