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.
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.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
About WBAG:STR
Flawless balance sheet, undervalued and pays a dividend.
