Estée Lauder Companies (NYSE:EL) Has Affirmed Its Dividend Of $0.66

The Estée Lauder Companies Inc.'s (NYSE:EL) investors are due to receive a payment of $0.66 per share on 15th of December. This means the annual payment will be 2.1% of the current stock price, which is lower than the industry average.

See our latest analysis for Estée Lauder Companies

Estée Lauder Companies' Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Before this announcement, Estée Lauder Companies was paying out 172% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 48%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

Estée Lauder Companies Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.72 in 2013 to the most recent total annual payment of $2.64. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Estée Lauder Companies' EPS has fallen by approximately 14% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. 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.

Estée Lauder Companies' Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Although they have been consistent in the past, we think the payments are a little high to be sustained. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Estée Lauder Companies has 4 warning signs (and 1 which is a bit concerning) we think you should know about. Is Estée Lauder Companies 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.