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Rémy Cointreau's (EPA:RCO) Shareholders Will Receive A Smaller Dividend Than Last Year

Simply Wall St · 06/22 08:53

Rémy Cointreau SA (EPA:RCO) is reducing its dividend from last year's comparable payment to €1.50 on the 1st of October. However, the dividend yield of 3.3% still remains in a typical range for the industry.

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Rémy Cointreau's Future Dividend Projections Appear Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Rémy Cointreau's dividend was only 64% of earnings, however it was paying out 405% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Looking forward, earnings per share is forecast to rise by 11.2% over the next year. If the dividend continues on this path, the payout ratio could be 59% by next year, which we think can be pretty sustainable going forward.

historic-dividend
ENXTPA:RCO Historic Dividend June 22nd 2025

View our latest analysis for Rémy Cointreau

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was €1.27, compared to the most recent full-year payment of €1.50. This means that it has been growing its distributions at 1.7% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth May Be Hard To Achieve

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. Although it's important to note that Rémy Cointreau's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Growth of 1.7% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On Rémy Cointreau's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Rémy Cointreau 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.