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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. The payment will take the dividend yield to 3.1%, which is in line with the 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 37% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Deutsche Bank's Payment Expected To Have Solid Earnings Coverage
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.
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 36% is a good sign as this means that earnings decently cover dividends.
Over the next 3 years, EPS is forecast to expand by 77.8%. Analysts estimate the future payout ratio will be 34% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
Check out our latest analysis for Deutsche Bank
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was €0.75, compared to the most recent full-year payment of €0.68. The dividend has shrunk at a rate of less than 1% a year over this period. 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. Deutsche Bank has impressed us by growing EPS at 54% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
We Really Like Deutsche Bank's Dividend
Overall, a dividend increase is always good, and we think that Deutsche Bank is a strong income stock thanks to its track record and growing earnings. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.