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Allianz SE's (ETR:ALV) dividend will be increasing from last year's payment of the same period to €11.40 on 9th of May. The payment will take the dividend yield to 5.3%, which is in line with the average for the industry.
Check out our latest analysis for Allianz
Allianz's Earnings Easily Cover The Distributions
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last payment was quite easily covered by earnings, but it made up 1,323% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.
Looking forward, earnings per share is forecast to rise by 70.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 43% by next year, which is in a pretty sustainable range.
Allianz Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of €4.50 in 2013 to the most recent total annual payment of €11.40. This means that it has been growing its distributions at 9.7% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Although it's important to note that Allianz's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Allianz is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.
Our Thoughts On Allianz's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Allianz's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.
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. Taking the debate a bit further, we've identified 1 warning sign for Allianz that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.