Yahoo Finance SAP's (ETR:SAP) Upcoming Dividend Will Be Larger Than Last Year's
SAP SE (ETR:SAP) will increase its dividend from last year's comparable payment on the 21st of May to €2.20. Based on this payment, the dividend yield for the company will be 1.2%, which is fairly typical for the industry.
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 SAP's stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Check out our latest analysis for SAP
SAP's Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, SAP's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
The next year is set to see EPS grow by 93.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% 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 dividend has gone from €1.00 total annually to €2.20. This implies that the company grew its distributions at a yearly rate of about 8.2% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
The Dividend's Growth Prospects Are Limited
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. However, SAP's EPS was effectively flat over the past five years, which could stop the company from paying more every year.
In Summary
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.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Given that earnings are not growing, the dividend does not look nearly so attractive. See if the 27 analysts are forecasting a turnaround in our free collection of analyst estimates here. 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.
