CropEnergies (ETR:CE2) Will Pay A Larger Dividend Than Last Year At €0.45

CropEnergies AG (ETR:CE2) will increase its dividend on the 15th of July to €0.45, which is 29% higher than last year. This takes the annual payment to 3.8% of the current stock price, which is about average for the industry.

View our latest analysis for CropEnergies

CropEnergies' Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, CropEnergies was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 8.7% over the next 12 months. 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

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from €0.15 in 2012 to the most recent annual payment of €0.35. This means that it has been growing its distributions at 8.8% 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. 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. It's encouraging to see CropEnergies has been growing its earnings per share at 11% a 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.

CropEnergies Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that CropEnergies is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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 in all, this checks a lot of the boxes we look for when choosing an income 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. For example, we've identified 2 warning signs for CropEnergies (1 shouldn't be ignored!) that you should be aware of before investing. Is CropEnergies not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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