Frequentis (ETR:FQT) Will Pay A Larger Dividend Than Last Year At €0.27

The board of Frequentis AG (ETR:FQT) has announced that it will be paying its dividend of €0.27 on the 16th of June, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 0.7%.

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 Frequentis' stock price has increased by 38% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Frequentis' Projected Earnings Seem Likely To Cover Future Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Frequentis' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 68.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 12%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Frequentis

Frequentis Is Still Building Its Track Record

It is great to see that Frequentis has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of €0.15 in 2020 to the most recent total annual payment of €0.27. This means that it has been growing its distributions at 12% per annum over that time. Frequentis has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings have grown at around 4.5% a year for the past five years, which isn't massive but still better than seeing them shrink. If Frequentis is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 4 analysts we track are forecasting for Frequentis for free with public analyst estimates for the company. 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.