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The board of easyJet plc (LON:EZJ) has announced that it will be paying its dividend of £0.121 on the 21st of March, an increased payment from last year's comparable dividend. This takes the annual payment to 2.4% of the current stock price, which is about average for the industry.
Check out our latest analysis for easyJet
easyJet's Future Dividend Projections Appear Well Covered By Earnings
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, easyJet's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 37.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 13% by next year, which is in a pretty sustainable range.
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 £0.454 in 2015, and the most recent fiscal year payment was £0.121. The dividend has fallen 73% over that period. A company that decreases its dividend over time generally isn't what we are looking for.
Dividend Growth May Be Hard To Come By
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. easyJet has seen earnings per share falling at 7.5% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
Our Thoughts On easyJet's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for easyJet that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.