Yahoo Finance Signify (AMS:LIGHT) Is Paying Out A Larger Dividend Than Last Year
Signify N.V. (AMS:LIGHT) will increase its dividend from last year's comparable payment on the 3rd of June to €1.55. This makes the dividend yield 5.5%, which is above the industry average.
Check out our latest analysis for Signify
Signify's Dividend Is Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Signify's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.
Over the next year, EPS is forecast to expand by 91.3%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 53% which would be quite comfortable going to take the dividend forward.
Signify's Dividend Has Lacked Consistency
Signify has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of €1.10 in 2017 to the most recent total annual payment of €1.55. This implies that the company grew its distributions at a yearly rate of about 5.0% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
The Dividend's Growth Prospects Are Limited
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Signify has seen earnings per share falling at 3.9% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
The Dividend Could Prove To Be Unreliable
Overall, we always like to see the dividend being raised, but we don't think Signify will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 3 warning signs for Signify that investors should take into consideration. Is Signify 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.
