The board of Nabaltec AG (ETR:NTG) has announced that it will be increasing its dividend by 12% on the 3rd of July to €0.28, up from last year's comparable payment of €0.25. Although the dividend is now higher, the yield is only 1.2%, which is below the industry average.
View our latest analysis for Nabaltec
Nabaltec's Earnings Easily Cover The Distributions
If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Nabaltec'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.
Over the next year, EPS is forecast to fall by 56.1%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 23%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Nabaltec's Dividend Has Lacked Consistency
Nabaltec has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2014, the annual payment back then was €0.06, compared to the most recent full-year payment of €0.25. This means that it has been growing its distributions at 17% per annum over that time. Nabaltec has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
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. We are encouraged to see that Nabaltec has grown earnings per share at 17% per year over the past five years. Nabaltec definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Nabaltec Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Nabaltec that investors should know about before committing capital to this stock. Is Nabaltec not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.