Heidelberg Materials (ETR:HEI) Is Increasing Its Dividend To €3.00

Heidelberg Materials AG's (ETR:HEI) dividend will be increasing from last year's payment of the same period to €3.00 on 21st of May. Based on this payment, the dividend yield for the company will be 3.0%, which is fairly typical for the industry.

Check out our latest analysis for Heidelberg Materials

Heidelberg Materials' Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Heidelberg Materials' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 17.6%. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty sustainable going forward.

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Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of €0.60 in 2014 to the most recent total annual payment of €3.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Heidelberg Materials has seen EPS rising for the last five years, at 13% per annum. Heidelberg Materials definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Heidelberg Materials Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Heidelberg Materials is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Heidelberg Materials that investors need to be conscious of moving forward. 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.