Bayerische Motoren Werke (ETR:BMW) Will Pay A Smaller Dividend Than Last Year

Bayerische Motoren Werke Aktiengesellschaft (ETR:BMW) has announced that on 21st of May, it will be paying a dividend of€6.00, which a reduction from last year's comparable dividend. This means that the annual payment will be 5.9% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Bayerische Motoren Werke

Bayerische Motoren Werke's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, Bayerische Motoren Werke's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 2.4%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 38%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was €2.60 in 2014, and the most recent fiscal year payment was €6.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.7% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Bayerische Motoren Werke has impressed us by growing EPS at 11% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Bayerische Motoren Werke's prospects of growing its dividend payments in the future.

Bayerische Motoren Werke Looks Like A Great Dividend Stock

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Bayerische Motoren Werke does. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. For example, we've identified 4 warning signs for Bayerische Motoren Werke (2 shouldn't be ignored!) 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.