Siemens Aktiengesellschaft (ETR:SIE) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy Siemens Aktiengesellschaft (ETR:SIE) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Siemens investors that purchase the stock on or after the 9th of February will not receive the dividend, which will be paid on the 13th of February.

The company's next dividend payment will be €4.70 per share, and in the last 12 months, the company paid a total of €4.70 per share. Based on the last year's worth of payments, Siemens stock has a trailing yield of around 2.8% on the current share price of €166.66. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Siemens

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Siemens paying out a modest 47% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 34% of its free cash flow in the past year.

It's positive to see that Siemens's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Siemens, with earnings per share up 7.7% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Siemens has lifted its dividend by approximately 4.6% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is Siemens an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Siemens is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Siemens is halfway there. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Siemens is facing. In terms of investment risks, we've identified 1 warning sign with Siemens and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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.