EnviTec Biogas' (ETR:ETG) Dividend Will Be €1.00

The board of EnviTec Biogas AG (ETR:ETG) has announced that it will pay a dividend on the 8th of July, with investors receiving €1.00 per share. This makes the dividend yield 3.0%, which will augment investor returns quite nicely.

Check out our latest analysis for EnviTec Biogas

EnviTec Biogas Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 150% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only . Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

EPS is set to grow by 13.4% over the next year if recent trends continue. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 146% over the next year.

EnviTec Biogas' Dividend Has Lacked Consistency

It's comforting to see that EnviTec Biogas has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The first annual payment during the last 7 years was €0.35 in 2015, and the most recent fiscal year payment was €1.00. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

EnviTec Biogas' Dividend Might Lack Growth

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. EnviTec Biogas has seen EPS rising for the last three years, at 13% per annum. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

Our Thoughts On EnviTec Biogas' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 3 warning signs for EnviTec Biogas that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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