CTT - Correios De Portugal (ELI:CTT) Will Pay A Larger Dividend Than Last Year At €0.12

CTT - Correios De Portugal, S.A. (ELI:CTT) will increase its dividend on the 20th of May to €0.12. This will take the annual payment from 3.2% to 3.2% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for CTT - Correios De Portugal

CTT - Correios De Portugal's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite comfortably covered by CTT - Correios De Portugal's earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Over the next year, EPS is forecast to expand by 23.6%. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.

CTT - Correios De Portugal's Dividend Has Lacked Consistency

CTT - Correios De Portugal has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2014, the dividend has gone from €0.40 to €0.12. The dividend has fallen 70% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Is Doubtful

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. It's not great to see that CTT - Correios De Portugal's earnings per share has fallen at approximately 7.3% per year over the past five years. 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. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On CTT - Correios De Portugal's Dividend

In summary, while it's always good to see the dividend being raised, we don't think CTT - Correios De Portugal's payments are rock solid. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for CTT - Correios De Portugal that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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