SAP (ETR:SAP) Is Increasing Its Dividend To €2.20
SAP SE (ETR:SAP) will increase its dividend from last year's comparable payment on the 21st of May to €2.20. This takes the annual payment to 1.3% of the current stock price, which is about average for the industry.
View our latest analysis for SAP
SAP'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. Based on the last payment, SAP was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, earnings per share is forecast to rise by 95.3% over the next year. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.
SAP Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of €0.85 in 2014 to the most recent total annual payment of €2.20. This works out to be a compound annual growth rate (CAGR) of approximately 10.0% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
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. Let's not jump to conclusions as things might not be as good as they appear on the surface. However, SAP's EPS was effectively flat over the past five years, which could stop the company from paying more every year.
Our Thoughts On SAP's Dividend
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Given that earnings are not growing, the dividend does not look nearly so attractive. See if the 25 analysts are forecasting a turnaround in our free collection of analyst estimates here. Is SAP not quite the opportunity you were looking for? Why not check out our selection of top 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.
