Stabilus' (ETR:STM) Dividend Will Be Increased To €1.75

Stabilus S.A. (ETR:STM) has announced that it will be increasing its dividend from last year's comparable payment on the 20th of February to €1.75. Based on this payment, the dividend yield for the company will be 2.7%, which is fairly typical for the industry.

Check out our latest analysis for Stabilus

Stabilus' Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by Stabilus' 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 25.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

Stabilus' Dividend Has Lacked Consistency

Stabilus has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2017, the annual payment back then was €0.50, compared to the most recent full-year payment of €1.75. This means that it has been growing its distributions at 23% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Stabilus Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Stabilus has grown earnings per share at 5.4% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Our Thoughts On Stabilus' Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. Taking the debate a bit further, we've identified 1 warning sign for Stabilus that investors need to be conscious of moving forward. Is Stabilus not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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