BAWAG Group (VIE:BG) Is Increasing Its Dividend To €5.00

The board of BAWAG Group AG (VIE:BG) has announced that it will be paying its dividend of €5.00 on the 15th of April, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 9.6%, providing a nice boost to shareholder returns.

See our latest analysis for BAWAG Group

BAWAG Group's Payment Expected To Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having paid out dividends for 6 years, BAWAG Group has a good history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but BAWAG Group's payout ratio of 60% is a good sign for current shareholders as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 17.3% over the next 3 years. Analysts forecast the future payout ratio could be 57% over the same time horizon, which is a number we think the company can maintain.

BAWAG Group's Dividend Has Lacked Consistency

It's comforting to see that BAWAG Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of €0.58 in 2018 to the most recent total annual payment of €5.00. This means that it has been growing its distributions at 43% per annum over that time. BAWAG Group 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that BAWAG Group has grown earnings per share at 15% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

BAWAG Group Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for BAWAG Group (1 is significant!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.