VERBUND's (VIE:VER) Dividend Will Be Reduced To €2.80

VERBUND AG (VIE:VER) has announced that on 19th of May, it will be paying a dividend of€2.80, which a reduction from last year's comparable dividend. The dividend yield will be in the average range for the industry at 4.1%.

Our free stock report includes 2 warning signs investors should be aware of before investing in VERBUND. Read for free now.

VERBUND's Future Dividends May Potentially Be At Risk

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. The last dividend was quite easily covered by VERBUND's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to fall by 40.8% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 110%, which is definitely a bit high to be sustainable going forward.

Check out our latest analysis for VERBUND

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 €0.29 in 2015 to the most recent total annual payment of €2.80. This means that it has been growing its distributions at 25% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. VERBUND has seen EPS rising for the last five years, at 28% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that VERBUND could prove to be a strong dividend payer.

We Really Like VERBUND's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like VERBUND does. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All of these factors considered, we think this has solid potential as a dividend stock.

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 example, we've identified 2 warning signs for VERBUND (1 is concerning!) 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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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.