RATIONAL's (ETR:RAA) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of RATIONAL Aktiengesellschaft (ETR:RAA) has announced that it will be paying its dividend of €15.00 on the 19th of May, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 2.0%, which is below the industry average.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

RATIONAL's Payment Could Potentially Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, RATIONAL was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 19.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 60% by next year, which is in a pretty sustainable range.

View our latest analysis for RATIONAL

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was €6.80, compared to the most recent full-year payment of €15.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.2% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. RATIONAL might have put its house in order since then, but we remain cautious.

We Could See RATIONAL's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that RATIONAL has grown earnings per share at 7.9% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Our Thoughts On RATIONAL's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for RATIONAL that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.