OHB (ETR:OHB) Has Announced That It Will Be Increasing Its Dividend To €0.60

OHB SE's (ETR:OHB) dividend will be increasing from last year's payment of the same period to €0.60 on 31st of May. This will take the annual payment to 1.8% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for OHB

OHB's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, OHB was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 86.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 17% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was €0.37 in 2013, and the most recent fiscal year payment was €0.60. This works out to be a compound annual growth rate (CAGR) of approximately 5.0% a year 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.

OHB Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that OHB has been growing its earnings per share at 7.9% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On OHB's Dividend

Overall, we always like to see the dividend being raised, but we don't think OHB will make a great income stock. While OHB is earning enough to cover the payments, the cash flows are lacking. We don't think OHB is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for OHB that you should be aware of before investing. Is OHB 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.