OHB (ETR:OHB) Is Increasing Its Dividend To €0.48

OHB SE (ETR:OHB) will increase its dividend on the 6th of June to €0.48. Based on the announced payment, the dividend yield for the company will be 1.5%, which is fairly typical for the industry.

View our latest analysis for OHB

OHB's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, OHB'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.

Over the next year, EPS is forecast to expand by 36.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 23% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from €0.35 in 2012 to the most recent annual payment of €0.48. This means that it has been growing its distributions at 3.2% 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.

OHB May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings has been rising at 4.4% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, OHB has the option to increase the payout ratio to return more cash to shareholders.

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, OHB has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about. 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.