Verbio SE's (ETR:VBK) investors are due to receive a payment of €0.20 per share on 7th of February. Including this payment, the dividend yield on the stock will be 0.7%, which is a modest boost for shareholders' returns.
Check out our latest analysis for Verbio
Verbio's Payment Has Solid Earnings Coverage
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Verbio is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
The next year is set to see EPS grow by 156.9%. If the dividend continues on this path, the payout ratio could be 7.0% by next year, which we think can be pretty sustainable going forward.
Verbio Doesn't Have A Long Payment History
It is great to see that Verbio 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. Since 2015, the annual payment back then was €0.10, compared to the most recent full-year payment of €0.20. This implies that the company grew its distributions at a yearly rate of about 9.1% over that duration. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Verbio to be a consistent dividend paying stock.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Verbio has impressed us by growing EPS at 38% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Verbio (of which 1 is potentially serious!) you should know about. Is Verbio not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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