Bayerische Motoren Werke (ETR:BMW) Is Reducing Its Dividend To €4.30

Bayerische Motoren Werke Aktiengesellschaft (ETR:BMW) has announced that on 19th of May, it will be paying a dividend of€4.30, which a reduction from last year's comparable dividend. Despite the cut, the dividend yield of 5.6% will still be comparable to other companies in the industry.

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

Bayerische Motoren Werke's Projected Earnings Seem Likely To Cover Future Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Bayerische Motoren Werke's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 18.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Bayerische Motoren Werke

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was €2.90 in 2015, and the most recent fiscal year payment was €4.30. This means that it has been growing its distributions at 4.0% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Bayerische Motoren Werke Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Bayerische Motoren Werke has been growing its earnings per share at 9.6% a year over the past five years. Bayerische Motoren Werke definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Bayerische Motoren Werke you should be aware of, and 1 of them doesn't sit too well with us. 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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