Erste Group Bank's (VIE:EBS) Shareholders Will Receive A Bigger Dividend Than Last Year

Erste Group Bank AG's (VIE:EBS) periodic dividend will be increasing on the 29th of May to €2.70, with investors receiving 42% more than last year's €1.90. This makes the dividend yield about the same as the industry average at 5.1%.

View our latest analysis for Erste Group Bank

Erste Group Bank's Earnings Will Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

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 30%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to fall by 12.9% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 46% over the same time period, which we think the company can easily maintain.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of €0.40 in 2013 to the most recent total annual payment of €1.90. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year 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

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. Erste Group Bank has impressed us by growing EPS at 14% 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, 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 company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Erste Group Bank you should be aware of, and 1 of them is significant. 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.