Athens Water Supply and Sewerage's (ATH:EYDAP) Dividend Is Being Reduced To €0.07

Athens Water Supply and Sewerage Company S.A. (ATH:EYDAP) has announced that on 28th of July, it will be paying a dividend of€0.07, which a reduction from last year's comparable dividend. This payment takes the dividend yield to 1.2%, which only provides a modest boost to overall returns.

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Athens Water Supply and Sewerage's Payment Could Potentially Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Athens Water Supply and Sewerage's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, EPS could fall by 24.1% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 62%, which is definitely feasible to continue.

See our latest analysis for Athens Water Supply and Sewerage

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was €0.20, compared to the most recent full-year payment of €0.07. This works out to be a decline of approximately 10.0% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Over the past five years, it looks as though Athens Water Supply and Sewerage's EPS has declined at around 24% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Athens Water Supply and Sewerage's Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Athens Water Supply and Sewerage that investors need to be conscious of moving forward. 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.