Südzucker (ETR:SZU) Is Increasing Its Dividend To €0.90

Südzucker AG's (ETR:SZU) periodic dividend will be increasing on the 23rd of July to €0.90, with investors receiving 29% more than last year's €0.70. This takes the dividend yield to 5.5%, which shareholders will be pleased with.

See our latest analysis for Südzucker

Südzucker Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Südzucker was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to fall by 77.0%. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 121%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was €0.90, compared to the most recent full-year payment of €0.70. The dividend has shrunk at around 2.5% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

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 73% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Südzucker 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 distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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 identified 2 warning signs for Südzucker (1 is a bit unpleasant!) that you should be aware of before investing. Is Südzucker not quite the opportunity you were looking for? Why not check out our selection of top 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.