HORNBACH Holding KGaA (ETR:HBH) Has Announced A Dividend Of €2.40

HORNBACH Holding AG & Co. KGaA's (ETR:HBH) investors are due to receive a payment of €2.40 per share on 10th of July. The dividend yield will be 3.1% based on this payment which is still above the industry average.

Check out our latest analysis for HORNBACH Holding KGaA

HORNBACH Holding KGaA's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, HORNBACH Holding KGaA's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 50.7%. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.

HORNBACH Holding KGaA Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2016, the annual payment back then was €1.50, compared to the most recent full-year payment of €2.40. This means that it has been growing its distributions at 6.1% per annum over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider HORNBACH Holding KGaA to be a consistent dividend paying stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that HORNBACH Holding KGaA has been growing its earnings per share at 14% a year over the past five years. HORNBACH Holding KGaA definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like HORNBACH Holding KGaA's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

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. Taking the debate a bit further, we've identified 1 warning sign for HORNBACH Holding KGaA that investors need to be conscious of moving forward. Is HORNBACH Holding KGaA 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.