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Berentzen-Gruppe Aktiengesellschaft's (ETR:BEZ) periodic dividend will be increasing on the 28th of May to €0.11, with investors receiving 22% more than last year's €0.09. Although the dividend is now higher, the yield is only 2.1%, which is below the industry average.
Estimates Indicate Berentzen-Gruppe's Dividend Coverage Likely To Improve
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Berentzen-Gruppe is unprofitable despite paying a dividend, and it is paying out 155% of its free cash flow. These payout levels would generally be quite difficult to keep up.
According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 15%, which makes us pretty comfortable with the sustainability of the dividend.
See our latest analysis for Berentzen-Gruppe
Berentzen-Gruppe's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 9 years was €0.20 in 2016, and the most recent fiscal year payment was €0.09. This works out to be a decline of approximately 8.5% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
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 Berentzen-Gruppe's EPS has declined at around 43% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
Berentzen-Gruppe's Dividend Doesn't Look Great
In conclusion, we have some concerns about this dividend, even though it being raised is good. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, the dividend is not reliable enough to make this a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Berentzen-Gruppe you should be aware of, and 1 of them is significant. 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.