BASF (ETR:BAS) Is Paying Out Less In Dividends Than Last Year

BASF SE (ETR:BAS) is reducing its dividend from last year's comparable payment to €2.25 on the 7th of May. Based on this payment, the dividend yield will be 4.5%, which is lower than the average for the industry.

BASF's Future Dividend Projections Appear Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

The next year is set to see EPS grow by 192.6%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 54% which brings it into quite a comfortable range.

View our latest analysis for BASF

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was €2.80 in 2015, and the most recent fiscal year payment was €2.25. The dividend has shrunk at around 2.2% 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.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. BASF's EPS has fallen by approximately 12% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

We're Not Big Fans Of BASF's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for BASF (of which 1 can't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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