Wienerberger's (VIE:WIE) Dividend Will Be Increased To €0.95

Wienerberger AG (VIE:WIE) will increase its dividend from last year's comparable payment on the 26th of May to €0.95. This will take the dividend yield to an attractive 3.3%, providing a nice boost to shareholder returns.

Our free stock report includes 4 warning signs investors should be aware of before investing in Wienerberger. Read for free now.

Wienerberger's Future Dividend Projections Appear 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 131% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 37%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 24%, which is in a comfortable range for us.

See our latest analysis for Wienerberger

Wienerberger Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of €0.15 in 2015 to the most recent total annual payment of €0.95. This means that it has been growing its distributions at 20% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Wienerberger's EPS has fallen by approximately 19% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. 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.

Our Thoughts On Wienerberger's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Wienerberger's payments are rock solid. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.

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. Case in point: We've spotted 4 warning signs for Wienerberger (of which 1 is a bit unpleasant!) you should know about. 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.