Hawesko Holding's (ETR:HAW) Upcoming Dividend Will Be Larger Than Last Year's

Hawesko Holding AG's (ETR:HAW) dividend will be increasing on the 17th of June to €2.50, with investors receiving 25% more than last year. This makes the dividend yield 4.6%, which is above the industry average.

See our latest analysis for Hawesko Holding

Hawesko Holding'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, Hawesko Holding's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to fall by 14.3%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 78%, which is definitely on the higher side.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was €1.50 in 2012, and the most recent fiscal year payment was €2.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.9% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see Hawesko Holding has been growing its earnings per share at 13% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Hawesko Holding Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Hawesko Holding is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. 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. All of these factors considered, we think this has solid potential as a dividend stock.

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. To that end, Hawesko Holding has 2 warning signs (and 1 which is significant) we think you should know about. Is Hawesko Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.