Bastei Lübbe's (ETR:BST) Dividend Will Be Increased To €0.30

Bastei Lübbe AG (ETR:BST) has announced that it will be increasing its periodic dividend on the 16th of September to €0.30, which will be 88% higher than last year's comparable payment amount of €0.16. Despite this raise, the dividend yield of 2.0% is only a modest boost to shareholder returns.

View our latest analysis for Bastei Lübbe

Bastei Lübbe's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Bastei Lübbe was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

The next year is set to see EPS grow by 9.1%. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was €0.28, compared to the most recent full-year payment of €0.16. This works out to be a decline of approximately 5.4% 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 Dividend Looks Likely To Grow

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. We are encouraged to see that Bastei Lübbe has grown earnings per share at 71% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Our Thoughts On Bastei Lübbe's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Bastei Lübbe's payments are rock solid. While Bastei Lübbe is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Bastei Lübbe that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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