KSB SE KGaA's (ETR:KSB) Shareholders Will Receive A Bigger Dividend Than Last Year

KSB SE & Co. KGaA's (ETR:KSB) dividend will be increasing from last year's payment of the same period to €26.50 on 13th of May. This will take the dividend yield to an attractive 3.3%, providing a nice boost to shareholder returns.

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KSB SE KGaA's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, KSB SE KGaA's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 22.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for KSB SE KGaA

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was €8.50 in 2015, and the most recent fiscal year payment was €26.50. This means that it has been growing its distributions at 12% per annum over that time. KSB SE KGaA has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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 22% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like KSB SE KGaA's Dividend

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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for KSB SE KGaA that you should be aware of before investing. 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.