Vestas Heads for 1st Dividend in Decade After Turnaround

Vestas Wind Systems A/S is heading for a first cash dividend payment in more than a decade, a sign the wind turbine industry led by its biggest manufacturer is prospering after a three-year slump.

Vestas will meet its full-year solvency and profitability targets that are preconditions for a dividend payment, according to all seven analysts following the company who responded to an e-mailed Bloomberg News survey. Six said a payout will come in 2015 after full-year earnings for this year are announced, and all expect payments in 2016.

“The combination of improved underlying cash flows together with a lower need for investment means they can pay a dividend,” Patrik Setterberg, an analyst at Nordea Markets, said in a phone interview from Copenhagen. “It’s a signal that the industry has reached a more mature level.”

The payments would be a boon for investors in an industry where dividends are rare. Of Europe’s three listed specialist wind turbine makers, Nordex SE has never paid a cash dividend; Vestas last paid out in April 2003, and Gamesa Corp. Tecnologica SA hasn’t returned money to investors since 2012.

“It’s a new industry which has to spend a lot of money to improve technology and profitability,” Ralf Peters, a spokesman for Nordex, said in a phone interview.

India’s Suzlon Energy Ltd. hasn’t paid a cash dividend since 2008. China’s Sinovel Wind Group Co. last paid one in July 2012. Only Xinjiang Goldwind Science & Technology Co. has paid dividends every year since 2008.

Profits Return

Yesterday, Vestas posted a third consecutive quarterly profit since snapping a run of nine losses. Chief Executive Officer Anders Runevad in May declined to be drawn on whether Vestas will pay a dividend after the financial year has ended. Yesterday, Chief Financial Officer Marika Fredriksson reiterated that it’s a decision for the board, while saying Vestas is heading “in that direction.”

“That would be a proof of the stability we’re working for in Vestas,” Fredriksson said in a phone interview from the company headquarters in Aarhus, Denmark. “If you look at the Q2 numbers, we are meeting the criteria” for a dividend payment.

In its annual report released in February, Vestas set out its priorities for how excess cash will be used.

First, the company will pay down debt if it has a ratio of one or higher for net debt to earnings before interest, taxes, depreciation, and amortization. If the ratio is below one, cash might be available for dividends. And if that cash were there, then, the company would pay out money to shareholders if its solvency ratio is above 30. That’s a measure of a company’s ability to meet its debt obligations.


Vestas met its criteria for both measures at the end of the second quarter, according to yesterday’s results. The solvency ratio was 31.6 percent and the net debt to ebitda ratio was minus 2.2.

The company’s balance sheet was boosted by a Feb. 4 sale of 20.4 million shares, which brought in 3.3 billion kroner ($590 million, or 440 million euros.)

“It’s positive that they may be paying a dividend for the first time in 11 years,” said Shai Hill, an analyst at Macquarie Group Ltd. in London. “Still, some shareholders will find it peculiar that the company is now returning cash having only tapped them for over 400 million euros cash in February.”

Vestas also has a 600 million-euro bond and two loans totaling 275 million euros that are due next year. While it’s “possible” they’ll refinance, “their balance sheet doesn’t force them to roll it over,” said Hill.

‘Small Dividend’

The company is evaluating what to do with the bond and the loans, Fredriksson said. “As you can see, we are net debt positive, so we’re in a good position,” she said.

The dividend policy states that the “general intention” of the board is to recommend a dividend of 25 percent to 30 percent of net income for the year. Macquarie’s Hill said that’ll probably leave Vestas on a dividend yield of about 1 percent, which “is not in itself something that will drive the share price.”

Setterberg at Nordea said he expects a “small” dividend of about 0.30 euro a share. “It’s more the signal behind the paying out of the dividend that’s important,” he said.

The dividend policy also includes the caveat that “pay-out of dividends will always take into consideration the group’s plans for growth and liquidity requirements,” leaving the board room to decide whether or not to pay one.

“Principally, they could pay a dividend, and this would be a very strong signal concerning their confidence in their future cash-generating ability,” Jacob Pedersen, an analyst at Sydbank A/S, said in an e-mail. “On the other hand, I expect that they will wait until the company has had another year of good cash-flow and stability in the business.”