Amadeus FiRe (ETR:AAD) Is Paying Out A Larger Dividend Than Last Year

The board of Amadeus FiRe AG (ETR:AAD) has announced that it will be paying its dividend of €5.00 on the 20th of May, an increased payment from last year's comparable dividend. This makes the dividend yield 4.2%, which is above the industry average.

View our latest analysis for Amadeus FiRe

Amadeus FiRe's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Amadeus FiRe's dividend made up quite a large proportion of earnings but only 36% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Looking forward, earnings per share is forecast to rise by 35.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 49%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of €2.83 in 2014 to the most recent total annual payment of €5.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.9% 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

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Amadeus FiRe has been growing its earnings per share at 10% a year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

We Really Like Amadeus FiRe's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Amadeus FiRe that you should be aware of before investing. Is Amadeus FiRe not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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