CropEnergies (ETR:CE2) Is Increasing Its Dividend To €0.60

CropEnergies AG (ETR:CE2) has announced that it will be increasing its periodic dividend on the 14th of July to €0.60, which will be 33% higher than last year's comparable payment amount of €0.45. This will take the annual payment to 4.5% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for CropEnergies

CropEnergies' Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. 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.

EPS is set to fall by 41.4% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 50%, 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 one cut in the last 10 years. The dividend has gone from an annual total of €0.20 in 2013 to the most recent total annual payment of €0.45. This implies that the company grew its distributions at a yearly rate of about 8.4% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. CropEnergies might have put its house in order since then, but we remain cautious.

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. CropEnergies has impressed us by growing EPS at 31% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

CropEnergies Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 CropEnergies that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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