In This Article:
The board of United Internet AG (ETR:UTDI) has announced that it will be paying its dividend of €1.90 on the 20th of May, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.8%, which is below the industry average.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that United Internet's stock price has increased by 35% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Our free stock report includes 2 warning signs investors should be aware of before investing in United Internet. Read for free now.
United Internet's Projections Indicate Future Payments May Be Unsustainable
Estimates Indicate United Internet's Could Struggle to Maintain Dividend Payments In The Future
United Internet's Future Dividends May Potentially Be At Risk
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. United Internet is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.
Earnings per share is forecast to rise exponentially over the next year. If recent patterns in the dividend continues, we would start to get a bit worried, with the payout ratio possibly reaching 372%.
View our latest analysis for United Internet
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of €0.60 in 2015 to the most recent total annual payment of €0.40. The dividend has shrunk at around 4.0% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.
Dividend Growth Potential Is Shaky
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. United Internet's EPS has fallen by approximately 23% 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. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.