Enel's (BIT:ENEL) Dividend Will Be €0.215

The board of Enel SpA (BIT:ENEL) has announced that it will pay a dividend on the 24th of July, with investors receiving €0.215 per share. This will take the annual payment to 7.2% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Enel

Enel's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

The next year is set to see EPS grow by 91.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 67%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Enel Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was €0.13, compared to the most recent full-year payment of €0.43. This means that it has been growing its distributions at 13% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Enel has seen earnings per share falling at 4.4% per year over the last 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. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Enel's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Enel's payments are rock solid. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Enel that investors should know about before committing capital to this stock. Is Enel not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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