HOCHTIEF's (ETR:HOT) Dividend Is Being Reduced To €1.91

HOCHTIEF Aktiengesellschaft's (ETR:HOT) dividend is being reduced to €1.91 on the 7th of July. The dividend yield will be in the average range for the industry at 3.1%.

View our latest analysis for HOCHTIEF

HOCHTIEF's Earnings Easily Cover the Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, HOCHTIEF's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 107.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

HOCHTIEF's Dividend Has Lacked Consistency

HOCHTIEF has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from €1.00 in 2013 to the most recent annual payment of €1.91. This means that it has been growing its distributions at 7.5% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth Is Doubtful

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. It's not great to see that HOCHTIEF's earnings per share has fallen at approximately 9.0% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On HOCHTIEF's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for HOCHTIEF that investors should know about before committing capital to this stock. Is HOCHTIEF not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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