Bayerische Motoren Werke's (ETR:BMW) Dividend Is Being Reduced To €6.00

Bayerische Motoren Werke Aktiengesellschaft's (ETR:BMW) dividend is being reduced from last year's payment covering the same period to €6.00 on the 21st of May. The dividend yield will be in the average range for the industry at 5.5%.

Check out our latest analysis for Bayerische Motoren Werke

Bayerische Motoren Werke's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. However, Bayerische Motoren Werke's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 3.9% over the next 12 months. 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. Since 2014, the annual payment back then was €2.60, compared to the most recent full-year payment of €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. It's encouraging to see that Bayerische Motoren Werke has been growing its earnings per share at 11% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Bayerische Motoren Werke's Dividend

Overall, we think that Bayerische Motoren Werke could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All in all, this checks a lot of the boxes we look for when choosing an income 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. Case in point: We've spotted 4 warning signs for Bayerische Motoren Werke (of which 2 are a bit unpleasant!) you should know about. Is Bayerische Motoren Werke not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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