OMV (VIE:OMV) Is Increasing Its Dividend To €5.05

OMV Aktiengesellschaft's (VIE:OMV) dividend will be increasing from last year's payment of the same period to €5.05 on 12th of June. The payment will take the dividend yield to 6.4%, which is in line with the average for the industry.

See 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, OMV's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 33.1% over the next 12 months. If recent patterns in the dividend continue, we could see the payout ratio reaching 77% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was €1.20 in 2013, and the most recent fiscal year payment was €2.80. This implies that the company grew its distributions at a yearly rate of about 8.8% over that duration. 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

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. It's encouraging to see that OMV has been growing its earnings per share at 94% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

OMV Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that OMV 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. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

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. For example, we've identified 2 warning signs for OMV (1 can't be ignored!) 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.