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The board of Deutsche Bank Aktiengesellschaft (ETR:DBK) has announced that it will be paying its dividend of €0.68 on the 27th of May, an increased payment from last year's comparable dividend. This takes the annual payment to 2.8% of the current stock price, which is about average for the industry.
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 Deutsche Bank's stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
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Deutsche Bank's Dividend Forecasted To Be Well Covered By Earnings
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.
Deutsche Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Deutsche Bank's payout ratio of 40% is a good sign as this means that earnings decently cover dividends.
Over the next 3 years, EPS is forecast to expand by 84.8%. Analysts estimate the future payout ratio will be 37% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
See our latest analysis for Deutsche Bank
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. Since 2015, the dividend has gone from €0.75 total annually to €0.68. The dividend has shrunk at a rate of less than 1% a year over this period. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Deutsche Bank has seen EPS rising for the last five years, at 44% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Deutsche Bank could prove to be a strong dividend payer.
Deutsche Bank Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.