Jerónimo Martins SGPS' (ELI:JMT) Dividend Will Be Reduced To €0.55

Jerónimo Martins, SGPS, S.A.'s (ELI:JMT) dividend is being reduced from last year's payment covering the same period to €0.55 on the 17th of May. The yield is still above the industry average at 2.4%.

View our latest analysis for Jerónimo Martins SGPS

Jerónimo Martins SGPS' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Jerónimo Martins SGPS was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 32.2%. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of €0.295 in 2013 to the most recent total annual payment of €0.55. This implies that the company grew its distributions at a yearly rate of about 6.4% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Jerónimo Martins SGPS has been growing its earnings per share at 10% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like Jerónimo Martins SGPS' Dividend

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Jerónimo Martins SGPS has the makings of a solid income stock moving forward. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Jerónimo Martins SGPS that investors should take into consideration. Is Jerónimo Martins SGPS 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.