CropEnergies (ETR:CE2) Is Increasing Its Dividend To €0.45

The board of CropEnergies AG (ETR:CE2) has announced that it will be increasing its dividend by 29% on the 15th of July to €0.45. Although the dividend is now higher, the yield is only 3.1%, which is below the industry average.

See our latest analysis for CropEnergies

CropEnergies' Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, CropEnergies' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 8.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 57%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from €0.15 in 2012 to the most recent annual payment of €0.35. This works out to be a compound annual growth rate (CAGR) of approximately 8.8% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that CropEnergies has grown earnings per share at 11% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like CropEnergies' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for CropEnergies you should be aware of, and 1 of them is a bit concerning. Is CropEnergies not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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