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Bilfinger SE (ETR:GBF) will increase its dividend from last year's comparable payment on the 19th of May to €2.40. Even though the dividend went up, the yield is still quite low at only 3.3%.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Bilfinger's stock price has increased by 60% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
See our latest analysis for Bilfinger
Bilfinger's Projected Earnings Seem Likely To Cover Future Distributions
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Bilfinger's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
The next year is set to see EPS grow by 41.5%. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of €3.00 in 2015 to the most recent total annual payment of €2.40. This works out to be a decline of approximately 2.2% per year over that time. 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.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Bilfinger has been growing its earnings per share at 217% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
Bilfinger Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Bilfinger is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.