OMV's (VIE:OMV) Upcoming Dividend Will Be Larger Than Last Year's

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. This takes the annual payment to 6.5% of the current stock price, which is about average for the industry.

See our latest analysis for OMV

OMV's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, OMV was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 33.1% over the next 12 months. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 80%, 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 dividend has gone from €1.20 total annually to €2.80. This means that it has been growing its distributions at 8.8% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. OMV might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. 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 distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 a bit unpleasant!) 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.