INDUS Holding (ETR:INH) Is Increasing Its Dividend To €1.20

INDUS Holding AG (ETR:INH) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of May to €1.20. This will take the annual payment to 4.6% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for INDUS Holding

INDUS Holding's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, INDUS Holding's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 36.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was €1.00 in 2014, and the most recent fiscal year payment was €1.20. This means that it has been growing its distributions at 1.8% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

INDUS Holding May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. INDUS Holding hasn't seen much change in its earnings per share over the last five years. While EPS growth is quite low, INDUS Holding has the option to increase the payout ratio to return more cash to shareholders.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for INDUS Holding that you should be aware of before investing. Is INDUS Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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