Shareholders Are Loving mwb fairtrade Wertpapierhandelsbank AG's (ETR:MWB) 1.3% Yield

Is mwb fairtrade Wertpapierhandelsbank AG (ETR:MWB) a good dividend stock? How can we tell? Dividend paying companies with growing earnings can be highly rewarding in the long term. If you are hoping to live on the income from dividends, it's important to be a lot more stringent with your investments than the average punter.

With a 1.3% yield and a five-year payment history, investors probably think mwb fairtrade Wertpapierhandelsbank looks like a reliable dividend stock. A low yield is generally a turn-off, but if the prospects for earnings growth were strong, investors might be pleasantly surprised by the long-term results. That said, the recent jump in the share price will make mwb fairtrade Wertpapierhandelsbank's dividend yield look smaller, even though the company prospects could be improving. There are a few simple ways to reduce the risks of buying mwb fairtrade Wertpapierhandelsbank for its dividend, and we'll go through these below.

Explore this interactive chart for our latest analysis on mwb fairtrade Wertpapierhandelsbank!

Payout ratios

Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. Looking at the data, we can see that 8.9% of mwb fairtrade Wertpapierhandelsbank's profits were paid out as dividends in the last 12 months. We'd say its dividends are thoroughly covered by earnings.

We update our data on mwb fairtrade Wertpapierhandelsbank every 24 hours, so you can always get our latest analysis of its financial health, here.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. Looking at the data, we can see that mwb fairtrade Wertpapierhandelsbank has been paying a dividend for the past five years. During the past five-year period, the first annual payment was €0.05 in 2016, compared to €0.2 last year. This works out to be a compound annual growth rate (CAGR) of approximately 29% a year over that time. The dividends haven't grown at precisely 29% every year, but this is a useful way to average out the historical rate of growth.

mwb fairtrade Wertpapierhandelsbank has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, but it might be worth considering if the business has turned a corner.

Dividend Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Strong earnings per share (EPS) growth might encourage our interest in the company despite fluctuating dividends, which is why it's great to see mwb fairtrade Wertpapierhandelsbank has grown its earnings per share at 77% per annum over the past five years. Earnings per share have grown rapidly, and the company is retaining a majority of its earnings. We think this is ideal from an investment perspective, if the company is able to reinvest these earnings effectively.

Conclusion

When we look at a dividend stock, we need to form a judgement on whether the dividend will grow, if the company is able to maintain it in a wide range of economic circumstances, and if the dividend payout is sustainable. We're glad to see mwb fairtrade Wertpapierhandelsbank has a low payout ratio, as this suggests earnings are being reinvested in the business. Next, earnings growth has been good, but unfortunately the dividend has been cut at least once in the past. Overall we think mwb fairtrade Wertpapierhandelsbank is an interesting dividend stock, although it could be better.

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. For instance, we've picked out 2 warning signs for mwb fairtrade Wertpapierhandelsbank that investors should take into consideration.

Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.

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This article by Simply Wall St is general in nature. 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.
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