HELMA Eigenheimbau (ETR:H5E) Is Reducing Its Dividend To €0.40

HELMA Eigenheimbau Aktiengesellschaft's (ETR:H5E) dividend is being reduced from last year's payment covering the same period to €0.40 on the 12th of July. This means that the dividend yield is 2.5%, which is a bit low when comparing to other companies in the industry.

See our latest analysis for HELMA Eigenheimbau

HELMA Eigenheimbau's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Before this announcement, HELMA Eigenheimbau was paying out 75% of earnings, but a comparatively small 10% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Analysts expect a massive rise in earnings per share in the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 20% which is fairly sustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was €0.20, compared to the most recent full-year payment of €0.40. This means that it has been growing its distributions at 7.2% per annum 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. HELMA Eigenheimbau might have put its house in order since then, but we remain cautious.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings per share has been sinking by 31% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 6 warning signs for HELMA Eigenheimbau (of which 1 is significant!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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