Stock Analysis

VERBUND (VIE:VER) Will Pay A Larger Dividend Than Last Year At €3.60

Source: Shutterstock

VERBUND AG (VIE:VER) has announced that it will be increasing its periodic dividend on the 15th of May to €3.60, which will be 243% higher than last year's comparable payment amount of €1.05. This takes the annual payment to 1.4% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for VERBUND

VERBUND's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, VERBUND's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 17.9% over the next year. If the dividend continues on this path, the payout ratio could be 75% by next year, which we think can be pretty sustainable going forward.

WBAG:VER Historic Dividend March 19th 2023

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from €0.55 total annually to €1.05. This means that it has been growing its distributions at 6.7% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. VERBUND has impressed us by growing EPS at 42% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

VERBUND Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that VERBUND is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for VERBUND 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.

Valuation is complex, but we're helping make it simple.

Find out whether VERBUND is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis