ING Groep (AMS:INGA) Is Increasing Its Dividend To €0.756

ING Groep N.V. (AMS:INGA) has announced that it will be increasing its dividend from last year's comparable payment on the 3rd of May to €0.756. This will take the annual payment to 9.2% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for ING Groep

ING Groep's Payment Expected To Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having paid out dividends for 9 years, ING Groep has a good history of paying out a part of its earnings to shareholders. Based on ING Groep's last earnings report, the payout ratio is at a decent 51%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next 3 years are set to see EPS grow by 3.1%. The future payout ratio could be 50% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

ING Groep's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2015, the annual payment back then was €0.12, compared to the most recent full-year payment of €1.11. This works out to be a compound annual growth rate (CAGR) of approximately 28% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

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. ING Groep has impressed us by growing EPS at 13% per year over the past five years. 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.

ING Groep 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. 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. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for ING Groep (of which 1 is potentially serious!) you should know about. Is ING Groep not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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