Hellenic Exchanges - Athens Stock Exchange (ATH:EXAE) Will Pay A Larger Dividend Than Last Year At €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 3.1%, providing a nice boost to shareholder returns.

See our latest analysis for Hellenic Exchanges - Athens Stock Exchange

Hellenic Exchanges - Athens Stock Exchange's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Hellenic Exchanges - Athens Stock Exchange was paying out quite a large proportion of both earnings and cash flow, with the dividend being 106% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Earnings per share is forecast to rise by 59.9% over the next year. 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 has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was €0.12, compared to the most recent full-year payment of €0.156. This implies that the company grew its distributions at a yearly rate of about 2.7% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Could Be Constrained

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. It's encouraging to see that Hellenic Exchanges - Athens Stock Exchange has been growing its earnings per share at 29% a 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.

Hellenic Exchanges - Athens Stock Exchange's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Hellenic Exchanges - Athens Stock Exchange that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.

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