Yahoo Finance Mercedes-Benz Group's (ETR:MBG) Shareholders Will Receive A Bigger Dividend Than Last Year
Mercedes-Benz Group AG (ETR:MBG) will increase its dividend from last year's comparable payment on the 14th of May to €5.30. Based on this payment, the dividend yield for the company will be 7.1%, which is fairly typical for the industry.
Check out our latest analysis for Mercedes-Benz Group
Mercedes-Benz Group's Payment Has Solid Earnings Coverage
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, Mercedes-Benz Group was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 88% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.
Over the next year, EPS is forecast to fall by 1.9%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 42%, which is comfortable for the company to continue in the future.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from €2.25 total annually to €5.30. This means that it has been growing its distributions at 8.9% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Mercedes-Benz Group has impressed us by growing EPS at 15% 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.
Our Thoughts On Mercedes-Benz Group's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Mercedes-Benz Group's payments are rock solid. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think Mercedes-Benz Group is a great stock to add to your portfolio if income is your focus.
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. For example, we've identified 3 warning signs for Mercedes-Benz Group (2 can't be ignored!) that you should be aware of before investing. 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.
