Mercedes-Benz Group (ETR:MBG) Is Increasing Its Dividend To €5.20

The board of Mercedes-Benz Group AG (ETR:MBG) has announced that it will be paying its dividend of €5.20 on the 8th of May, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 7.4%.

See our latest analysis for Mercedes-Benz Group

Mercedes-Benz Group's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Mercedes-Benz Group was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 5.2% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 41%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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 €2.20 total annually to €5.20. This works out to be a compound annual growth rate (CAGR) of approximately 9.0% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Mercedes-Benz Group might have put its house in order since then, but we remain cautious.

Mercedes-Benz Group Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Mercedes-Benz Group has impressed us by growing EPS at 7.1% per 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.

Our Thoughts On Mercedes-Benz Group's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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 3 warning signs for Mercedes-Benz Group (2 are concerning!) that you should be aware of before investing. Is Mercedes-Benz Group not quite the opportunity you were looking for? Why not check out our selection of top 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.