AGRANA Beteiligungs-Aktiengesellschaft (VIE:AGR) Is Increasing Its Dividend To €0.90

The board of AGRANA Beteiligungs-Aktiengesellschaft (VIE:AGR) has announced that it will be paying its dividend of €0.90 on the 14th of July, an increased payment from last year's comparable dividend. This makes the dividend yield 5.2%, which is above the industry average.

Check out our latest analysis for AGRANA Beteiligungs-Aktiengesellschaft

AGRANA Beteiligungs-Aktiengesellschaft Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, AGRANA Beteiligungs-Aktiengesellschaft was paying out 356% of what it was earning, and not generating any free cash flows either. This high of a dividend payment could start to put pressure on the balance sheet in the future.

Over the next year, EPS is forecast to expand by 67.6%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 186%, which probably can't continue without putting some pressure on the balance sheet.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The last annual payment of €0.90 was flat on the annual payment from10 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Has Limited Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though AGRANA Beteiligungs-Aktiengesellschaft's EPS has declined at around 31% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

We're Not Big Fans Of AGRANA Beteiligungs-Aktiengesellschaft's Dividend

Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, the dividend is not reliable enough to make this a good income stock.

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. Just as an example, we've come across 3 warning signs for AGRANA Beteiligungs-Aktiengesellschaft you should be aware of, and 2 of them can't be ignored. Is AGRANA Beteiligungs-Aktiengesellschaft not quite the opportunity you were looking for? Why not check out our selection of top 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.