EL.En (BIT:ELN) Is Increasing Its Dividend To €0.22

EL.En. S.p.A.'s (BIT:ELN) dividend will be increasing from last year's payment of the same period to €0.22 on 21st of May. This will take the dividend yield to an attractive 2.5%, providing a nice boost to shareholder returns.

View our latest analysis for EL.En

EL.En's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, EL.En's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 4.7% if recent trends continue. If the dividend continues on this path, the payout ratio could be 56% by next year, which we think can be pretty sustainable going forward.

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Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of €0.0313 in 2015 to the most recent total annual payment of €0.22. This means that it has been growing its distributions at 22% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth May Be Hard To Achieve

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. Earnings has been rising at 4.7% per annum over the last five years, which admittedly is a bit slow. If EL.En is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 EL.En that investors should know about before committing capital to this stock. Is EL.En 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.