REN - Redes Energéticas Nacionais SGPS' (ELI:RENE) Shareholders Will Receive A Smaller Dividend Than Last Year

REN - Redes Energéticas Nacionais, SGPS, S.A.'s (ELI:RENE) dividend is being reduced from last year's payment covering the same period to €0.09 on the 16th of May. This means the annual payment is 4.9% of the current stock price, which is above the average for the industry.

Check out our latest analysis for REN - Redes Energéticas Nacionais SGPS

REN - Redes Energéticas Nacionais SGPS' Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Looking forward, earnings per share is forecast to fall by 0.4% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 87% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was €0.169, compared to the most recent full-year payment of €0.128. Doing the maths, this is a decline of about 2.7% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. REN - Redes Energéticas Nacionais SGPS hasn't seen much change in its earnings per share over the last five years.

REN - Redes Energéticas Nacionais SGPS' Dividend Doesn't Look Great

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for REN - Redes Energéticas Nacionais SGPS that investors need to be conscious of moving forward. Is REN - Redes Energéticas Nacionais 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.