MVV Energie (ETR:MVV1) Will Pay A Larger Dividend Than Last Year At €1.45

The board of MVV Energie AG (ETR:MVV1) has announced that it will be paying its dividend of €1.45 on the 13th of March, an increased payment from last year's comparable dividend. This takes the annual payment to 3.4% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for MVV Energie

MVV Energie's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, MVV Energie's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

If the trend of the last few years continues, EPS will grow by 66.3% over the next 12 months. If the dividend continues on this path, the payout ratio could be 18% by next year, which we think can be pretty sustainable going forward.

MVV Energie Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was €0.90, compared to the most recent full-year payment of €1.15. This works out to be a compound annual growth rate (CAGR) of approximately 2.5% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. MVV Energie has seen EPS rising for the last five years, at 66% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On MVV Energie's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While MVV Energie is earning enough to cover the payments, the cash flows are lacking. We don't think MVV Energie is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for MVV Energie (of which 1 can't be ignored!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.