Südzucker (ETR:SZU) Has Announced That It Will Be Increasing Its Dividend To €0.70

The board of Südzucker AG (ETR:SZU) has announced that it will be paying its dividend of €0.70 on the 18th of July, an increased payment from last year's comparable dividend. This will take the annual payment to 4.2% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Südzucker

Südzucker'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. Südzucker is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The next year is set to see EPS grow by 42.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from €0.90 total annually to €0.70. The dividend has shrunk at around 2.5% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Südzucker Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Südzucker has impressed us by growing EPS at 6.5% 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.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Südzucker's payments are rock solid. While Südzucker is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Südzucker (of which 1 shouldn't be ignored!) you should know about. 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.