ING Groep N.V.'s (AMS:INGA) investors are due to receive a payment of €0.71 per share on 2nd of May. This means the annual payment is 6.0% of the current stock price, which is above the average for the industry.

Check out our latest analysis for ING Groep

ING Groep's Earnings Will Easily Cover The Distributions

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

ING Groep has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 54%, which means that ING Groep 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 28.7%. Analysts estimate the future payout ratio will be 51% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was €0.12 in 2015, and the most recent fiscal year payment was €1.06. This means that it has been growing its distributions at 24% per annum over that time. 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that ING Groep has been growing its earnings per share at 11% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like ING Groep's Dividend

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 ING Groep has the makings of a solid income stock moving forward. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for ING Groep that you should be aware of before investing. Is ING Groep not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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