Südzucker (ETR:SZU) Will Pay A Smaller Dividend Than Last Year

Südzucker AG (ETR:SZU) has announced that on 22nd of July, it will be paying a dividend of€0.20, which a reduction from last year's comparable dividend. This means that the dividend yield is 1.8%, which is a bit low when comparing to other companies in the industry.

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Südzucker's Long-term Dividend Outlook appears Promising

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Even though Südzucker isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 10%, so there isn't too much pressure on the dividend.

Check out our latest analysis for Südzucker

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was €0.25, compared to the most recent full-year payment of €0.20. This works out to be a decline of approximately 2.2% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Company Could Face Some Challenges Growing The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Südzucker has seen EPS rising for the last five years, at 46% per annum. While the company is not yet turning a profit, it is growing at a good rate. If the company can turn a profit relatively soon, we can see this becoming a reliable income stock.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Südzucker that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.