Banca Transilvania (BVB:TLV) Has Announced That It Will Be Increasing Its Dividend To RON1.73

Banca Transilvania S.A.'s (BVB:TLV) dividend will be increasing from last year's payment of the same period to RON1.73 on 30th of June. This makes the dividend yield about the same as the industry average at 4.1%.

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Banca Transilvania's Earnings Will Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Banca Transilvania has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. Using data from its latest earnings report, Banca Transilvania's payout ratio sits at 23%, an extremely comfortable number that shows that it can pay its dividend.

EPS is set to fall by 12.0% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 41% over the same time period, which we think the company can easily maintain.

See our latest analysis for Banca Transilvania

Banca Transilvania's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. Since 2016, the dividend has gone from RON1.31 total annually to RON1.09. The dividend has shrunk at around 2.0% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

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. Banca Transilvania has impressed us by growing EPS at 21% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Banca Transilvania's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Banca Transilvania that you should be aware of before investing. 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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