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ProCredit Holding AG's (ETR:PCZ) dividend is being reduced from last year's payment covering the same period to €0.59 on the 9th of June. The dividend yield of 6.1% is still a nice boost to shareholder returns, despite the cut.
Our free stock report includes 1 warning sign investors should be aware of before investing in ProCredit Holding. Read for free now.
ProCredit Holding's Payment Expected To Have Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much.
Having paid out dividends for 8 years, ProCredit Holding has a good history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but ProCredit Holding's payout ratio of 33% is a good sign for current shareholders as this means that earnings decently cover dividends.
Over the next 3 years, EPS is forecast to expand by 51.0%. Analysts forecast the future payout ratio could be 33% over the same time horizon, which is a number we think the company can maintain.
See our latest analysis for ProCredit Holding
ProCredit Holding's Dividend Has Lacked Consistency
ProCredit Holding has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The annual payment during the last 8 years was €0.38 in 2017, and the most recent fiscal year payment was €0.59. This implies that the company grew its distributions at a yearly rate of about 5.7% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. ProCredit Holding has impressed us by growing EPS at 12% 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 ProCredit Holding's Dividend
Overall, we think that ProCredit Holding could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. 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.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 1 warning sign for ProCredit Holding that investors need to be conscious of moving forward. 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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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.