Erste Group Bank (VIE:EBS) Has Announced That It Will Be Increasing Its Dividend To €1.90

The board of Erste Group Bank AG (VIE:EBS) has announced that it will be paying its dividend of €1.90 on the 19th of May, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 6.2%, which is in line with the average for the industry.

Check out our latest analysis for Erste Group Bank

Erste Group Bank's Dividend Forecasted To Be Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Having distributed dividends for at least 10 years, Erste Group Bank has a long history of paying out a part of its earnings to shareholders. Based on Erste Group Bank's last earnings report, the payout ratio is at a decent 36%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 3.3% over the next 3 years. Analysts forecast the future payout ratio could be 43% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was €0.40, compared to the most recent full-year payment of €1.90. This means that it has been growing its distributions at 17% per annum over that time. Erste Group Bank 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 Erste Group Bank has grown earnings per share at 13% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Erste Group Bank 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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Erste Group Bank that investors should take into consideration. Is Erste Group Bank not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.