Deutsche Post's (ETR:DPW) Upcoming Dividend Will Be Larger Than Last Year's

Deutsche Post AG (ETR:DPW) has announced that it will be increasing its dividend on the 11th of May to €1.80. This will take the dividend yield from 4.1% to 4.1%, providing a nice boost to shareholder returns.

Check out our latest analysis for Deutsche Post

Deutsche Post's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Deutsche Post was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to fall by 2.2%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 48%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Deutsche Post Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the dividend has gone from €0.70 to €1.80. This works out to be a compound annual growth rate (CAGR) of approximately 9.9% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Deutsche Post has seen EPS rising for the last five years, at 13% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Deutsche Post Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. For example, we've picked out 2 warning signs for Deutsche Post that investors should know about before committing capital to this stock. Is Deutsche Post 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.