OTP Bank Nyrt's (BUSE:OTP) Dividend Is Being Reduced To HUF300.16

OTP Bank Nyrt.'s (BUSE:OTP) dividend is being reduced from last year's payment covering the same period to HUF300.16 on the 5th of June. This means that the annual payment is 2.7% of the current stock price, which is lower than what the rest of the industry is paying.

View our latest analysis for OTP Bank Nyrt

OTP Bank Nyrt's Payment Expected To Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

Having distributed dividends for at least 10 years, OTP Bank Nyrt has a long history of paying out a part of its earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 24% also shows that OTP Bank Nyrt is able to comfortably pay dividends.

Over the next 3 years, EPS is forecast to expand by 5.6%. Analysts estimate the future payout ratio will be 26% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the annual payment back then was HUF100.00, compared to the most recent full-year payment of HUF300.16. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that OTP Bank Nyrt has grown earnings per share at 12% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like OTP Bank Nyrt's Dividend

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that OTP Bank Nyrt has the makings of a solid income stock moving forward. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for OTP Bank Nyrt that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.