Strabag (VIE:STR) Is Paying Out Less In Dividends Than Last Year

Simply Wall St
May 09, 2022
Source: Shutterstock

Strabag SE (VIE:STR) has announced it will be reducing its dividend payable on the 21st of June to €2.00. The dividend yield of 5.6% is still a nice boost to shareholder returns, despite the cut.

View our latest analysis for Strabag

Strabag's Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, Strabag's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 27.3%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 66%, which we are pretty comfortable with and we think is feasible on an earnings basis.

WBAG:STR Historic Dividend May 9th 2022

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 €0.60 in 2012 to the most recent annual payment of €2.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Strabag has grown earnings per share at 16% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Strabag's prospects of growing its dividend payments in the future.

We Really Like Strabag's Dividend

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Strabag has the makings of a solid income stock moving forward. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Strabag has 2 warning signs (and 1 which is concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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