How Does Grammer AG (FRA:GMM) Fare As A Dividend Stock?

Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Grammer AG (FRA:GMM) has returned to shareholders over the past 10 years, an average dividend yield of 2.00% annually. Let's dig deeper into whether Grammer should have a place in your portfolio. View out our latest analysis for Grammer

How I analyze a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is their annual yield among the top 25% of dividend payers?
• Does it consistently pay out dividends without missing a payment of significantly cutting payout?
• Has dividend per share amount increased over the past?
• Is is able to pay the current rate of dividends from its earnings?
• Will it be able to continue to payout at the current rate in the future?

Does Grammer pass our checks?

Grammer has a trailing twelve-month payout ratio of 50.34%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 32.00%, leading to a dividend yield of 2.45%. However, EPS should increase to €4.71, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Although GMM's per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.

Relative to peers, Grammer generates a yield of 2.07%, which is on the low-side for Auto Components stocks.

Next Steps:

With these dividend metrics in mind, I definitely rank Grammer as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I've compiled three essential aspects you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for GMM’s future growth? Take a look at our free research report of analyst consensus for GMM’s outlook.
2. Valuation: What is GMM worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether GMM is currently mispriced by the market.
3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.