PIERER Mobility's (VIE:PKTM) Dividend Will Be Reduced To €0.50

PIERER Mobility AG (VIE:PKTM) has announced it will be reducing its dividend payable on the 29th of April to €0.50, which is 75% lower than what investors received last year for the same period. The yield is still above the industry average at 4.4%.

Check out our latest analysis for PIERER Mobility

PIERER Mobility's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last dividend, PIERER Mobility is earning enough to cover the payment, but then it makes up 99% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Over the next year, EPS could expand by 24.8% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 11%, which is in the range that makes us comfortable with the sustainability of the dividend.

PIERER Mobility's Dividend Has Lacked Consistency

It's comforting to see that PIERER Mobility 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. The dividend has gone from an annual total of €0.30 in 2016 to the most recent total annual payment of €2.00. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that PIERER Mobility has grown earnings per share at 25% 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.

Our Thoughts On PIERER Mobility's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for PIERER Mobility (1 shouldn't be ignored!) that you should be aware of before investing. Is PIERER Mobility not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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