OVB Holding (ETR:O4B) Has Affirmed Its Dividend Of €0.90

The board of OVB Holding AG (ETR:O4B) has announced that it will pay a dividend of €0.90 per share on the 19th of June. This means the annual payment is 3.8% of the current stock price, which is above the average for the industry.

See our latest analysis for OVB Holding

OVB Holding's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. At the time of the last dividend payment, OVB Holding was paying out a very large proportion of what it was earning and 140% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Over the next year, EPS is forecast to expand by 27.3%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 71% which would be quite comfortable going to take the dividend forward.

OVB Holding Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of €0.55 in 2013 to the most recent total annual payment of €0.90. This means that it has been growing its distributions at 5.0% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings per share has been crawling upwards at 3.9% per year. Slow growth and a high payout ratio could mean that OVB Holding has maxed out the amount that it has been able to pay to shareholders. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about OVB Holding's payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 OVB Holding that investors need to be conscious of moving forward. Is OVB Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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