ProCredit Holding AG (ETR:PCZ) is reducing its dividend from last year's comparable payment to €0.59 on the 9th of June. The dividend yield of 6.5% is still a nice boost to shareholder returns, despite the cut.

ProCredit Holding's Dividend Forecasted To Be Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

ProCredit Holding has established itself as a dividend paying company, given its 8-year history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 36%shows that ProCredit Holding would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 69.9%. The future payout ratio could be 33% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Check out our latest analysis for ProCredit Holding

ProCredit Holding's Dividend Has Lacked Consistency

ProCredit Holding has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 8 years was €0.38 in 2017, and the most recent fiscal year payment was €0.59. This means that it has been growing its distributions at 5.7% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. ProCredit Holding might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that ProCredit Holding has been growing its earnings per share at 12% a year over the past five years. ProCredit Holding definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

ProCredit Holding Looks Like A Great Dividend Stock

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that ProCredit Holding has the makings of a solid income stock moving forward. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for ProCredit Holding that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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