Siemens Aktiengesellschaft (ETR:SIE) will increase its dividend on the 15th of February to €4.00. Based on the announced payment, the dividend yield for the company will be 2.8%, which is fairly typical for the industry.
Siemens' Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite easily covered by Siemens' earnings. 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 24.7%. If the dividend continues on this path, the payout ratio could be 51% by next year, which we think can be pretty sustainable going forward.
Siemens Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the first annual payment was €2.70, compared to the most recent full-year payment of €4.00. This implies that the company grew its distributions at a yearly rate of about 4.0% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
Siemens May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Unfortunately, Siemens' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
Overall, this is a reasonable dividend, and it being raised is an added bonus. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Siemens that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.
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