Wacker Neuson (ETR:WAC) Will Pay A Larger Dividend Than Last Year At €0.90

The board of Wacker Neuson SE (ETR:WAC) has announced that it will be increasing its dividend on the 8th of June to €0.90. This will take the annual payment from 4.3% to 4.3% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Wacker Neuson

Wacker Neuson's Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Wacker Neuson's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to fall by 6.3% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 51%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was €0.50 in 2012, and the most recent fiscal year payment was €0.90. This works out to be a compound annual growth rate (CAGR) of approximately 6.1% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Wacker Neuson might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see Wacker Neuson has been growing its earnings per share at 21% a year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Wacker Neuson Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Wacker Neuson is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. For instance, we've picked out 1 warning sign for Wacker Neuson that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.