HORNBACH Baumarkt's (ETR:HBM) Upcoming Dividend Will Be Larger Than Last Year's

The board of HORNBACH Baumarkt AG (ETR:HBM) has announced that the dividend on 12th of July will be increased to €0.90, which will be 32% higher than last year. This will take the dividend yield from 1.7% to 2.3%, providing a nice boost to shareholder returns.

See our latest analysis for HORNBACH Baumarkt

HORNBACH Baumarkt's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, HORNBACH Baumarkt was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 23.7% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 12% by next year, which we think can be pretty sustainable going forward.

HORNBACH Baumarkt Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from €0.50 in 2011 to the most recent annual payment of €0.68. This works out to be a compound annual growth rate (CAGR) of approximately 3.1% a year over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. HORNBACH Baumarkt has impressed us by growing EPS at 24% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

HORNBACH Baumarkt Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for HORNBACH Baumarkt that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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