PATRIZIA SE (ETR:PAT) will increase its dividend from last year's comparable payment on the 31st of May to €0.33. The payment will take the dividend yield to 3.5%, which is in line with the average for the industry.
Check out our latest analysis for PATRIZIA
PATRIZIA's Dividend Is Well Covered By Earnings
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, the company was paying out 399% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 25%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.
According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 67%, which is in a comfortable range for us.
PATRIZIA Doesn't Have A Long Payment History
It is great to see that PATRIZIA has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of €0.25 in 2018 to the most recent total annual payment of €0.33. This implies that the company grew its distributions at a yearly rate of about 5.7% over that duration. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.
Dividend Growth Potential Is Shaky
Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. PATRIZIA's EPS has fallen by approximately 33% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
The Dividend Could Prove To Be Unreliable
Overall, we always like to see the dividend being raised, but we don't think PATRIZIA will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for PATRIZIA that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.