KWS SAAT SE KGaA (ETR:KWS) Is Increasing Its Dividend To €0.90

KWS SAAT SE & Co. KGaA's (ETR:KWS) dividend will be increasing from last year's payment of the same period to €0.90 on 18th of December. Even though the dividend went up, the yield is still quite low at only 1.7%.

See our latest analysis for KWS SAAT SE KGaA

KWS SAAT SE KGaA's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, KWS SAAT SE KGaA was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 42.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which is in the range that makes us comfortable with the sustainability of the dividend.

KWS SAAT SE KGaA Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was €0.60, compared to the most recent full-year payment of €0.90. This means that it has been growing its distributions at 4.1% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Earnings per share has been crawling upwards at 3.5% per year. If KWS SAAT SE KGaA is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On KWS SAAT SE KGaA's Dividend

Overall, we always like to see the dividend being raised, but we don't think KWS SAAT SE KGaA will make a great income stock. While KWS SAAT SE KGaA is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, KWS SAAT SE KGaA has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.