Euroseas (NASDAQ:ESEA) Is Paying Out A Larger Dividend Than Last Year
Euroseas Ltd.'s (NASDAQ:ESEA) dividend will be increasing from last year's payment of the same period to $0.60 on 15th of March. This makes the dividend yield about the same as the industry average at 6.7%.
View our latest analysis for Euroseas
Euroseas' Earnings Easily Cover The Distributions
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Euroseas was paying a whopping 95% as a dividend, but this only made up 13% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Over the next year, EPS is forecast to fall by 38.1%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 19%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of $4.80 in 2014 to the most recent total annual payment of $2.40. Doing the maths, this is a decline of about 6.7% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend Looks Likely To Grow
Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. It's encouraging to see that Euroseas has been growing its earnings per share at 68% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
Our Thoughts On Euroseas' Dividend
Overall, we always like to see the dividend being raised, but we don't think Euroseas will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Euroseas (2 are significant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
