Erste Group Bank (VIE:EBS) Is Increasing Its Dividend To €2.70

The board of Erste Group Bank AG (VIE:EBS) has announced that it will be increasing its dividend by 42% on the 29th of May to €2.70, up from last year's comparable payment of €1.90. This makes the dividend yield about the same as the industry average at 4.8%.

Check out our latest analysis for Erste Group Bank

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

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Erste Group Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 30%, which means that Erste Group Bank would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share is forecast to fall by 11.9% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 49% over the same time period, which we think the company can easily maintain.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of €0.40 in 2014 to the most recent total annual payment of €1.90. This means that it has been growing its distributions at 17% per annum over that time. 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

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. Erste Group Bank has seen EPS rising for the last five years, at 14% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Erste Group Bank Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Erste Group Bank is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Erste Group Bank (1 is a bit concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.