UNIQA Insurance Group (VIE:UQA) Is Increasing Its Dividend To €0.57

UNIQA Insurance Group AG (VIE:UQA) has announced that it will be increasing its dividend from last year's comparable payment on the 17th of June to €0.57. This will take the dividend yield to an attractive 6.9%, providing a nice boost to shareholder returns.

Check out our latest analysis for UNIQA Insurance Group

UNIQA Insurance Group's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, UNIQA Insurance Group was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Looking forward, earnings per share could rise by 5.8% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 52%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 €0.35 in 2014, and the most recent fiscal year payment was €0.57. This implies that the company grew its distributions at a yearly rate of about 5.0% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

UNIQA Insurance Group Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that UNIQA Insurance Group has been growing its earnings per share at 5.8% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Our Thoughts On UNIQA Insurance Group's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While UNIQA Insurance Group is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think UNIQA Insurance Group is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for UNIQA Insurance Group that investors should take into consideration. 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.