ING Groep's (AMS:INGA) Dividend Is Being Reduced To €0.389

ING Groep N.V.'s (AMS:INGA) dividend is being reduced from last year's payment covering the same period to €0.389 on the 5th of May. This means that the annual payment will be 5.0% of the current stock price, which is in line with the average for the industry.

See our latest analysis for ING Groep

ING Groep's Payment Expected To Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

ING Groep has established itself as a dividend paying company, given its 8-year history of distributing earnings to shareholders. While past data isn't a guarantee for the future, ING Groep's latest earnings report puts its payout ratio at 17%, showing that the company can pay out its dividends comfortably.

EPS is set to fall by 41.4% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 54% over the same time period, which we think the company can easily maintain.

ING Groep's Dividend Has Lacked Consistency

ING Groep has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of €0.12 in 2015 to the most recent total annual payment of €0.559. This means that it has been growing its distributions at 21% per annum over that time. ING Groep has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that ING Groep has grown earnings per share at 19% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like ING Groep'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 ING Groep has the makings of a solid income stock moving forward. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All in all, this checks a lot of the boxes we look for when choosing an income 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 shouldn't be ignored!) you should know about. 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.