Südzucker's (ETR:SZU) Shareholders Will Receive A Smaller Dividend Than Last Year

Südzucker AG (ETR:SZU) is reducing its dividend from last year's comparable payment to €0.20 on the 22nd of July. Based on this payment, the dividend yield will be 2.0%, which is lower than the average for the industry.

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Südzucker's Long-term Dividend Outlook appears Promising

Even a low dividend yield can be attractive if it is sustained for years on end. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. These payout levels would generally be quite difficult to keep up.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 3.8%, which makes us pretty comfortable with the sustainability of the dividend.

See our latest analysis for Südzucker

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from €0.25 total annually to €0.20. This works out to be a decline of approximately 2.2% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Company Could Face Some Challenges Growing The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Südzucker has impressed us by growing EPS at 31% per year over the past five years. Even though the company is not profitable, it is growing at a solid clip. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer.

Südzucker's Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. Strong earnings growth means Südzucker has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We don't think Südzucker is a great stock to add to your portfolio if income is your focus.

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. As an example, we've identified 2 warning signs for Südzucker that you should be aware of before investing. 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.