Medicon Hellas (ATH:MEDIC) Has Announced That It Will Be Increasing Its Dividend To €0.06

Medicon Hellas S.A. (ATH:MEDIC) will increase its dividend from last year's comparable payment on the 19th of July to €0.06. This will take the dividend yield to an attractive 5.7%, providing a nice boost to shareholder returns.

See our latest analysis for Medicon Hellas

Medicon Hellas' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Medicon Hellas' earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

EPS is set to fall by 6.3% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 21%, which is definitely feasible to continue.

Medicon Hellas Is Still Building Its Track Record

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Dividend Growth May Be Hard To Come By

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. It's not great to see that Medicon Hellas' earnings per share has fallen at approximately 6.3% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Medicon Hellas' Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Medicon Hellas will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Medicon Hellas is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 3 warning signs for Medicon Hellas that investors need to be conscious of moving forward. Is Medicon Hellas not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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