Enel (BIT:ENEL) Is Paying Out A Larger Dividend Than Last Year

Enel SpA (BIT:ENEL) will increase its dividend on the 21st of July to €0.18. This makes the dividend yield 4.4%, which is above the industry average.

View our latest analysis for Enel

Enel's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 141% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Over the next year, EPS is forecast to expand by 114.6%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 75% which is a bit high but can definitely be sustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was €0.28 in 2011, and the most recent fiscal year payment was €0.37. This means that it has been growing its distributions at 2.7% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Enel May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Enel hasn't seen much change in its earnings per share over the last five years. So the company has struggled to grow its EPS yet it's still paying out 141% of its earnings. This gives limited room for the company to raise the dividend in the future.

Enel's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Enel will make a great income stock. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 3 warning signs for Enel that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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