Voestalpine (VIE:VOE) Is Increasing Its Dividend To €1.50

The board of Voestalpine AG (VIE:VOE) has announced that it will be paying its dividend of €1.50 on the 17th of July, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 4.7%, which is in line with the average for the industry.

See our latest analysis for Voestalpine

Voestalpine's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, Voestalpine was paying only paying out a fraction of earnings, but the payment was a massive 127% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

EPS is set to fall by 35.4% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 41%, which is comfortable for the company to continue in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of €0.80 in 2013 to the most recent total annual payment of €1.50. This means that it has been growing its distributions at 6.5% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Voestalpine 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 Voestalpine has been growing its earnings per share at 5.1% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Voestalpine's prospects of growing its dividend payments in the future.

Our Thoughts On Voestalpine's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 Voestalpine (1 is a bit unpleasant!) that you should be aware of before investing. 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.