Entravision Communications' (NYSE:EVC) Dividend Will Be Increased To $0.05

Entravision Communications Corporation (NYSE:EVC) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of June to $0.05. This makes the dividend yield 3.5%, which is above the industry average.

See our latest analysis for Entravision Communications

Entravision Communications' Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Entravision Communications' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 46.1%. If the dividend continues on this path, the payout ratio could be 47% by next year, which we think can be pretty sustainable going forward.

Entravision Communications Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.12 in 2013, and the most recent fiscal year payment was $0.20. This means that it has been growing its distributions at 5.2% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Entravision Communications' EPS has fallen by approximately 36% 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. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Our Thoughts On Entravision Communications' Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Entravision Communications that investors should take into consideration. Is Entravision Communications not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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