Enel (BIT:ENEL) announces dividend increase to €0.20.
Enel SpA, listed as BIT:ENEL, has announced a dividend increase on the 26th of July. The new payment will be €0.20, surpassing last year's comparable payment. The annual payment will amount to 7.3% of the stock price, a higher percentage compared to most companies in the same industry.
Check out our most recent examination of Enel
Enel's Profits Secure Strong Financial Cushion for Payments
If a company can't continue to pay a high dividend yield for a long time, then it's not really valuable. Before this statement, the earnings could only support 61% of the dividend, and the company wasn't making any extra cash. Payouts are a serious worry for the future of dividends when they are very high in comparison to earnings and there's no free cash flow. This level of risk is quite concerning.
In the future, it's predicted that earnings per share will increase by 164.2% within the coming year. Assuming that the dividend remains consistent with current trends, we believe that the payout ratio may reach 70%, making it feasible to continue increasing the dividend payments.
Even though the business has been providing dividends for a while, it has been reduced at least once during the past decade. Initially, it was €0.26 yearly in 2013 but it has climbed up to €0.40 annually now. This growth rate is calculated to be around 4.4% per year on a compounded basis. Though it's good to know that the dividend has increased, the slow rate of growth and inconsistency in payments may limit the total profit of the stockholders.
Achieving Dividend Growth Can Be Challenging
If you're thinking about how the dividend has gone up and down in the past, you might want to take into account how much money the company is earning for each share. Unfortunately, Enel's earnings per share hasn't really gone up in the last five years, meaning that over time the dividend may be worth less because of inflation. Even though they're struggling to make more money, Enel is still paying out more in dividends than they're actually earning - in fact, they're paying out 161% of their earnings. With not much growth in earnings and such a high payout, it's hard to see how the dividend can go up a lot in the future unless Enel has some big advantage over other companies.
The dividend may not be a dependable source of income.
In general, it's nice when companies increase their dividend payments, but we don't believe that Enel is an ideal choice for generating consistent income. The company's history in this area hasn't been impressive, and the payments may not be feasible in the long term. We recommend proceeding with caution and not relying too heavily on this stock as a primary source of dividend income.
Observing the movement of the market shows that a reliable dividend policy is greatly appreciated when compared to an erratic one. However, investors should not solely focus on dividend payments when assessing a company. For instance, we have detected 4 indicators of concern for Enel (with 2 being a bit more worrisome!), which investors should be aware of. If you're on the lookout for stocks with substantial dividend returns, take a look at our compilation of dependable dividend providers.
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