Carel Industries' (BIT:CRL) Shareholders Will Receive A Smaller Dividend Than Last Year

Carel Industries S.p.A. (BIT:CRL) is reducing its dividend from last year's comparable payment to €0.165 on the 25th of June. This means that the annual payment is 1.1% of the current stock price, which is lower than what the rest of the industry is paying.

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Carel Industries' Payment Could Potentially Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Carel Industries' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 32.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

See our latest analysis for Carel Industries

Carel Industries Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2019, the dividend has gone from €0.10 total annually to €0.165. This implies that the company grew its distributions at a yearly rate of about 8.7% over that duration. Carel Industries has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Carel Industries has been growing its earnings per share at 9.7% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Carel Industries' prospects of growing its dividend payments in the future.

Carel Industries Looks Like A Great Dividend Stock

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Carel Industries does. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Carel Industries that you should be aware of before investing. Is Carel Industries 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.