Repsol (BME:REP) Will Pay A Dividend Of €0.405

Repsol, S.A. (BME:REP) has announced that it will pay a dividend of €0.405 per share on the 8th of July. The dividend yield will be 8.8% based on this payment which is still above the industry average.

We've discovered 3 warning signs about Repsol. View them for free.

Repsol's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Over the next year, EPS is forecast to expand by 169.6%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 31% which would be quite comfortable going to take the dividend forward.

See our latest analysis for Repsol

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of €0.977 in 2015 to the most recent total annual payment of €0.975. Payments have been decreasing at a very slow pace in this time period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Could Be Constrained

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Repsol has seen EPS rising for the last five years, at 51% per annum. EPS has been growing well, but Repsol has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

Repsol's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Strong earnings growth means Repsol has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Repsol you should be aware of, and 1 of them doesn't sit too well with us. Is Repsol 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.