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Hapag-Lloyd Aktiengesellschaft (ETR:HLAG) has announced that on 6th of May, it will be paying a dividend of€8.20, which a reduction from last year's comparable dividend. This means that the annual payment is 6.8% of the current stock price, which is lower than what the rest of the industry is paying.
Estimates Indicate Hapag-Lloyd's Could Struggle to Maintain Dividend Payments In The Future
Even a low dividend yield can be attractive if it is sustained for years on end. The last dividend was quite easily covered by Hapag-Lloyd's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Over the next year, EPS is forecast to fall by 71.8%. Assuming the dividend continues along recent trends, we believe the payout ratio could reach over 200%, which could put the dividend under pressure if earnings don't start to improve.
See our latest analysis for Hapag-Lloyd
Hapag-Lloyd's Dividend Has Lacked Consistency
It's comforting to see that Hapag-Lloyd has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2019, the annual payment back then was €0.15, compared to the most recent full-year payment of €8.20. This works out to be a compound annual growth rate (CAGR) of approximately 95% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Hapag-Lloyd has impressed us by growing EPS at 46% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.
We Really Like Hapag-Lloyd's Dividend
In general, we don't like to see the dividend being cut, especially when the company has such high potential like Hapag-Lloyd does. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.
