Knorr-Bremse's (ETR:KBX) Upcoming Dividend Will Be Larger Than Last Year's

Knorr-Bremse AG (ETR:KBX) will increase its dividend from last year's comparable payment on the 6th of May to €1.75. Based on this payment, the dividend yield for the company will be 2.2%, which is fairly typical for the industry.

Our free stock report includes 1 warning sign investors should be aware of before investing in Knorr-Bremse. Read for free now.

Knorr-Bremse's Future Dividend Projections Appear Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Knorr-Bremse was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 95.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 31%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Knorr-Bremse

Knorr-Bremse's Dividend Has Lacked Consistency

Looking back, Knorr-Bremse's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The most recent annual payment of €1.75 is about the same as the annual payment 6 years ago. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's not great to see that Knorr-Bremse's earnings per share has fallen at approximately 5.4% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Knorr-Bremse's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Knorr-Bremse that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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