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Grenke AG's (ETR:GLJ) dividend is being reduced from last year's payment covering the same period to €0.40 on the 12th of May. Based on this payment, the dividend yield will be 2.9%, which is lower than the average for the industry.
View our latest analysis for Grenke
Grenke's Future Dividend Projections Appear Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. However, Grenke's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to rise by 140.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 11% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was €0.367 in 2015, and the most recent fiscal year payment was €0.40. Dividend payments have been growing, but very slowly over the period. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
Dividend Growth Potential Is Shaky
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 13% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
Our Thoughts On Grenke's Dividend
Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Grenke (of which 1 is concerning!) you should know about. Is Grenke not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.