AGRANA Beteiligungs-Aktiengesellschaft's (VIE:AGR) Shareholders Will Receive A Smaller Dividend Than Last Year

AGRANA Beteiligungs-Aktiengesellschaft's (VIE:AGR) dividend is being reduced to €0.75 on the 15th of July. This means the annual payment is 4.4% of the current stock price, which is above the average for the industry.

View our latest analysis for AGRANA Beteiligungs-Aktiengesellschaft

AGRANA Beteiligungs-Aktiengesellschaft's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 530% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 68%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from €0.90 in 2012 to the most recent annual payment of €0.75. The dividend has shrunk at around 1.8% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

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. Over the past five years, it looks as though AGRANA Beteiligungs-Aktiengesellschaft's EPS has declined at around 43% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

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

To sum up, we don't like when dividends are cut, but in this case the dividend may have been too high to begin with. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, AGRANA Beteiligungs-Aktiengesellschaft has 4 warning signs (and 2 which are significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.