Enel (BIT:ENEL) Will Pay A Dividend Of €0.215

Enel SpA (BIT:ENEL) will pay a dividend of €0.215 on the 24th of July. This makes the dividend yield 6.9%, which is above the industry average.

See our latest analysis for Enel

Enel's 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, the company was paying out 120% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

The next year is set to see EPS grow by 89.7%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 71% which would be quite comfortable going to take the dividend forward.

Enel Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of €0.13 in 2014 to the most recent total annual payment of €0.43. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth Is Doubtful

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. In the last five years, Enel's earnings per share has shrunk at approximately 5.4% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Enel will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've identified 2 warning signs for Enel (1 shouldn't be ignored!) 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.