Stabilus (ETR:STM) Is Increasing Its Dividend To €1.25

Stabilus S.A. (ETR:STM) has announced that it will be increasing its dividend on the 21st of February to €1.25. This makes the dividend yield 1.9%, which is above the industry average.

View our latest analysis for Stabilus

Stabilus' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Stabilus was quite comfortably earning enough to cover the dividend. 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 20.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

Stabilus' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. The first annual payment during the last 5 years was €0.50 in 2017, and the most recent fiscal year payment was €1.25. This means that it has been growing its distributions at 20% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Stabilus Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Stabilus has impressed us by growing EPS at 6.1% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Our Thoughts On Stabilus' Dividend

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. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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 1 warning sign for Stabilus that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.