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

Erste Group Bank AG (VIE:EBS) will increase its dividend from last year's comparable payment on the 29th of May to €2.70. This will take the dividend yield to an attractive 5.9%, providing a nice boost to shareholder returns.

See our latest analysis for Erste Group Bank

Erste Group Bank's Payment Expected To Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much.

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 37%, which means that Erste Group Bank would be able to pay its last dividend without pressure on the balance sheet.

Over the next 3 years, EPS is forecast to fall by 16.7%. However, as estimated by analysts, the future payout ratio could be 45% over the same time period, which we think the company can easily maintain.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from €0.20 total annually to €2.70. This means that it has been growing its distributions at 30% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Erste Group Bank has seen EPS rising for the last five years, at 13% per annum. Erste Group Bank definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

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. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Erste Group Bank (of which 1 shouldn't be ignored!) you should know about. Is Erste Group Bank not quite the opportunity you were looking for? Why not check out our selection of top 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.