DWS Group GmbH KGaA (ETR:DWS) Is Increasing Its Dividend To €2.00

DWS Group GmbH & Co. KGaA's (ETR:DWS) dividend will be increasing to €2.00 on 14th of June. This takes the dividend yield from 5.8% to 5.8%, which shareholders will be pleased with.

Check out our latest analysis for DWS Group GmbH KGaA

DWS Group GmbH KGaA's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite comfortably covered by DWS Group GmbH KGaA's earnings, but it was a bit tighter on the cash flow front. The business is earning enough to make the dividend feasible, but the cash payout ratio of 82% indicates it is more focused on returning cash to shareholders than growing the business.

Over the next year, EPS is forecast to expand by 11.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 46% by next year, which is in a pretty sustainable range.

DWS Group GmbH KGaA Is Still Building Its Track Record

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. Since 2019, the dividend has gone from €1.37 to €2.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. DWS Group GmbH KGaA has impressed us by growing EPS at 26% per year over the past three years. DWS Group GmbH KGaA is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think DWS Group GmbH KGaA will make a great income stock. While DWS Group GmbH KGaA is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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 yield 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.