SAP's (ETR:SAP) Shareholders Will Receive A Bigger Dividend Than Last Year
SAP SE (ETR:SAP) has announced that it will be increasing 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 Dividend Is Well Covered By Earnings
We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, SAP was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, earnings per share is forecast to rise by 96.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.
SAP Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was €0.85, compared to the most recent full-year payment of €2.20. This means that it has been growing its distributions at 10.0% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Dividend Growth May Be Hard To Achieve
Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Although it's important to note that SAP's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.
Our Thoughts On SAP's Dividend
Overall, this is a reasonable dividend, and it being raised is an added bonus. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Given that earnings are not growing, the dividend does not look nearly so attractive. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 27 analysts we track are forecasting for the future. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
