Enel's (BIT:ENEL) Shareholders Will Receive A Bigger Dividend Than Last Year

Enel SpA (BIT:ENEL) will increase its dividend from last year's comparable payment on the 23rd of July to €0.255. This makes the dividend yield 6.4%, which is above the industry average.

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Enel's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Enel was paying out quite a large proportion of both earnings and cash flow, with the dividend being 317% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Looking forward, earnings per share is forecast to rise by 6.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 73%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Enel

Enel Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was €0.14 in 2015, and the most recent fiscal year payment was €0.51. This means that it has been growing its distributions at 14% 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.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Enel has impressed us by growing EPS at 26% per year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Enel is not retaining those earnings to reinvest in growth.

Our Thoughts On Enel's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Enel is a great stock to add to your portfolio if income is your focus.

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 example, we've identified 2 warning signs for Enel (1 is potentially serious!) 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.