DEUTZ (ETR:DEZ) Is Paying Out A Dividend Of €0.17

DEUTZ Aktiengesellschaft (ETR:DEZ) has announced that it will pay a dividend of €0.17 per share on the 13th of May. This means that the annual payment will be 2.4% of the current stock price, which is in line with the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that DEUTZ's stock price has increased by 73% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

DEUTZ's Future Dividend Projections Appear Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, DEUTZ was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

According to analysts, EPS should be several times higher next year. If the dividend extends its recent trend, estimates say the dividend could reach 17%, which we would be comfortable to see continuing.

View our latest analysis for DEUTZ

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 dividend has gone from an annual total of €0.07 in 2015 to the most recent total annual payment of €0.17. This works out to be a compound annual growth rate (CAGR) of approximately 9.3% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth Is Doubtful

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's not great to see that DEUTZ's earnings per share has fallen at approximately 6.9% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for DEUTZ that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.