DWS Group GmbH & Co. KGaA's (ETR:DWS) dividend will be increasing on the 14th of June to €2.00, with investors receiving 10% more than last year. This will take the dividend yield from 4.7% to 5.2%, providing a nice boost to shareholder returns.
See our latest analysis for DWS Group GmbH KGaA
DWS Group GmbH KGaA's Dividend Is Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, DWS Group GmbH KGaA 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.
Over the next year, EPS is forecast to expand by 3.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 63%, which is in the range that makes us comfortable with the sustainability of the dividend.
DWS Group GmbH KGaA Doesn't Have A Long Payment History
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The first annual payment during the last 3 years was €1.37 in 2019, and the most recent fiscal year payment was €1.81. This implies that the company grew its distributions at a yearly rate of about 9.7% over that duration. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.
DWS Group GmbH KGaA May Find It Hard To Grow The Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Growth of may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.
In Summary
Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. 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. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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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.
About XTRA:DWS
DWS Group GmbH KGaA
Offers asset management services in Europe, the Middle East, Africa, the Americas, and the Asia Pacific.
Undervalued with excellent balance sheet.
