Societatea Energetica Electrica (BVB:EL) Is Paying Out A Larger Dividend Than Last Year

Societatea Energetica Electrica S.A. (BVB:EL) will increase its dividend from last year's comparable payment on the 27th of June to RON0.1767. Even though the dividend went up, the yield is still quite low at only 1.4%.

Our free stock report includes 2 warning signs investors should be aware of before investing in Societatea Energetica Electrica. Read for free now.

Societatea Energetica Electrica's Future Dividend Projections Appear Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, based ont he last payment, Societatea Energetica Electrica was earning enough to cover the dividend pretty comfortably. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Looking forward, earnings per share could rise by 11.9% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 13%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Societatea Energetica Electrica

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was RON0.722 in 2015, and the most recent fiscal year payment was RON0.1767. The dividend has fallen 76% 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.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Societatea Energetica Electrica has seen EPS rising for the last five years, at 12% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Societatea Energetica Electrica's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Societatea Energetica Electrica is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Societatea Energetica Electrica you should be aware of, and 1 of them is concerning. Is Societatea Energetica Electrica not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.