In This Article:
Signify N.V. (AMS:LIGHT) will increase its dividend on the 5th of June to €1.50, which is 3.4% higher than last year's payment from the same period of €1.45. This takes the dividend yield to 4.2%, which shareholders will be pleased with.
See 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. Prior to this announcement, Signify's dividend was only 31% of earnings, however it was paying out 134% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.
Over the next year, EPS is forecast to fall by 15.8%. If the dividend continues along recent trends, we estimate the payout ratio could be 39%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Signify's Dividend Has Lacked Consistency
Signify has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2017, the dividend has gone from €1.10 total annually to €1.45. This means that it has been growing its distributions at 4.7% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Signify has impressed us by growing EPS at 17% per year over the past five years. Signify definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Our Thoughts On Signify's Dividend
Overall, we always like to see the dividend being raised, but we don't think Signify will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Signify has 3 warning signs (and 2 which are potentially serious) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.