DWS Group GmbH KGaA (ETR:DWS) Has Announced That It Will Be Increasing Its Dividend To €2.00

The board of DWS Group GmbH & Co. KGaA (ETR:DWS) has announced that it will be increasing its dividend on the 14th of June to €2.00. This will take the dividend yield from 6.3% to 6.3%, providing a nice boost to shareholder returns.

See our latest analysis for DWS Group GmbH KGaA

DWS Group GmbH KGaA's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by DWS Group GmbH KGaA's earnings. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to fall by 8.5% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 55%, which we are pretty comfortable with and we think is feasible on an earnings basis.

DWS Group GmbH KGaA Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The dividend has gone from €1.37 in 2019 to the most recent annual payment of €2.00. This means that it has been growing its distributions at 13% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

DWS Group GmbH KGaA May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Growth of may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for DWS Group GmbH KGaA that investors need to be conscious of moving forward. Is DWS Group GmbH KGaA not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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