JOST Werke (ETR:JST) Is Increasing Its Dividend To €1.05

The board of JOST Werke AG (ETR:JST) has announced that it will be increasing its dividend on the 10th of May to €1.05. The announced payment will take the dividend yield to 2.9%, which is in line with the average for the industry.

View our latest analysis for JOST Werke

JOST Werke's Earnings Easily Cover the Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, JOST Werke's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 22.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.

JOST Werke's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2018, the dividend has gone from €0.50 to €1.05. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. JOST Werke has seen earnings per share falling at 6.4% per year over the last three years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On JOST Werke's Dividend

Overall, we always like to see the dividend being raised, but we don't think JOST Werke will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for JOST Werke (1 is potentially serious!) that you should be aware of before investing. Is JOST Werke not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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