Energiekontor (ETR:EKT) Will Pay A Smaller Dividend Than Last Year

Energiekontor AG (ETR:EKT) has announced that on 2nd of June, it will be paying a dividend of€0.50, which a reduction from last year's comparable dividend. This payment takes the dividend yield to 1.2%, which only provides a modest boost to overall returns.

Our free stock report includes 4 warning signs investors should be aware of before investing in Energiekontor. Read for free now.

Energiekontor's Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Energiekontor's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 9.0%, so there isn't too much pressure on the dividend.

Check out our latest analysis for Energiekontor

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 2015, the dividend has gone from €0.60 total annually to €0.50. The dividend has shrunk at around 1.8% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Energiekontor has grown earnings per share at 149% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Energiekontor's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While Energiekontor is earning enough to cover the payments, the cash flows are lacking. We don't think Energiekontor is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Energiekontor has 4 warning signs (and 1 which is a bit concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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