Semperit Holding (VIE:SEM) Has Affirmed Its Dividend Of €0.50

Semperit Aktiengesellschaft Holding (VIE:SEM) has announced that it will pay a dividend of €0.50 per share on the 30th of April. The dividend yield will be 3.4% based on this payment which is still above the industry average.

See our latest analysis for Semperit Holding

Semperit Holding's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment was quite easily covered by earnings, but it made up 102% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to expand by 196.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was €0.90, compared to the most recent full-year payment of €0.50. Doing the maths, this is a decline of about 5.7% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Over the past five years, it looks as though Semperit Holding's EPS has declined at around 13% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Semperit Holding's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Semperit Holding is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for Semperit Holding that you should be aware of before investing. Is Semperit Holding 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.