ProCredit Holding (ETR:PCZ) Has Announced That Its Dividend Will Be Reduced To €0.59

ProCredit Holding AG (ETR:PCZ) has announced that on 9th of June, it will be paying a dividend of€0.59, which a reduction from last year's comparable dividend. The yield is still above the industry average at 6.1%.

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ProCredit Holding's Payment Expected To Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

ProCredit Holding has established itself as a dividend paying company, given its 8-year history of distributing earnings to shareholders. Based on ProCredit Holding's last earnings report, the payout ratio is at a decent 33%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 51.0% over the next 3 years. Analysts forecast the future payout ratio could be 33% over the same time horizon, which is a number we think the company can maintain.

Check out our latest analysis for ProCredit Holding

ProCredit Holding's Dividend Has Lacked Consistency

Looking back, ProCredit Holding's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of €0.38 in 2017 to the most recent total annual payment of €0.59. This works out to be a compound annual growth rate (CAGR) of approximately 5.7% 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. ProCredit Holding might have put its house in order since then, but we remain cautious.

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. ProCredit Holding has seen EPS rising for the last five years, at 12% per annum. 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.

ProCredit Holding Looks Like A Great Dividend Stock

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that ProCredit Holding has the makings of a solid income stock moving forward. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. 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. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for ProCredit Holding that investors need to be conscious of moving forward. 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.