KSB SE KGaA (ETR:KSB) Will Pay A Larger Dividend Than Last Year At €26.00

KSB SE & Co. KGaA's (ETR:KSB) dividend will be increasing from last year's payment of the same period to €26.00 on 14th of May. This will take the annual payment to 3.9% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for KSB SE KGaA

KSB SE KGaA's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, KSB SE KGaA's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 68.2% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from €12.00 total annually to €26.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.0% 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.

The Dividend Looks Likely To Grow

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. KSB SE KGaA has seen EPS rising for the last five years, at 68% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

KSB SE KGaA Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that KSB SE KGaA is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. For example, we've picked out 1 warning sign for KSB SE KGaA that investors should know about before committing capital to this stock. 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.