Corticeira Amorim, S.G.P.S., S.A. (ELI:COR) will increase its dividend on the 13th of May to €0.20. This makes the dividend yield about the same as the industry average at 2.8%.
Corticeira Amorim S.G.P.S' Payment Has Solid Earnings Coverage
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Corticeira Amorim S.G.P.S' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
The next year is set to see EPS grow by 10.6%. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was €0.10 in 2012, and the most recent fiscal year payment was €0.23. This means that it has been growing its distributions at 8.7% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
Dividend Growth Is Doubtful
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that Corticeira Amorim S.G.P.S' earnings per share has fallen at approximately 6.2% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
Our Thoughts On Corticeira Amorim S.G.P.S' Dividend
Overall, we always like to see the dividend being raised, but we don't think Corticeira Amorim S.G.P.S will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good 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. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 7 analysts we track are forecasting for the future. Is Corticeira Amorim S.G.P.S not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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