OMV (VIE:OMV) Has Announced That It Will Be Increasing Its Dividend To €5.05

OMV Aktiengesellschaft (VIE:OMV) has announced that it will be increasing its dividend from last year's comparable payment on the 12th of June to €5.05. This takes the annual payment to 6.2% of the current stock price, which is about average for the industry.

View our latest analysis for OMV

OMV's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, OMV's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 32.3%. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 75%, meaning that most of the company's earnings are being paid out to shareholders.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was €1.10, compared to the most recent full-year payment of €2.80. This works out to be a compound annual growth rate (CAGR) of approximately 9.8% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

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 OMV has grown earnings per share at 53% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like OMV's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for OMV (1 is concerning!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.