Vienna Insurance Group (VIE:VIG) Is Increasing Its Dividend To €1.40

Vienna Insurance Group AG's (VIE:VIG) dividend will be increasing from last year's payment of the same period to €1.40 on 29th of May. This makes the dividend yield 4.5%, which is above the industry average.

View our latest analysis for Vienna Insurance Group

Vienna 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. Based on the last payment, Vienna Insurance Group was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 21.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, 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 dividend has gone from an annual total of €1.30 in 2014 to the most recent total annual payment of €1.40. Its dividends have grown at less than 1% per annum over this time frame. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

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 Vienna Insurance Group has been growing its earnings per share at 16% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Vienna Insurance Group's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Vienna Insurance Group 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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