KWS SAAT SE KGaA's (ETR:KWS) Shareholders Will Receive A Bigger Dividend Than Last Year

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%.

View our latest analysis for KWS SAAT SE KGaA

KWS SAAT SE KGaA's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. But before making this announcement, KWS SAAT SE KGaA's earnings quite easily covered the dividend. The business is earning enough to make the dividend feasible, but the cash payout ratio of 85% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

Looking forward, earnings per share is forecast to rise by 36.2% over the next year. If the dividend continues on this path, the payout ratio could be 18% by next year, which we think can be pretty sustainable going forward.

KWS SAAT SE KGaA Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was €0.60, compared to the most recent full-year payment of €0.90. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. However, KWS SAAT SE KGaA has only grown its earnings per share at 5.0% per annum over the past five years. While EPS growth is quite low, KWS SAAT SE KGaA has the option to increase the payout ratio to return more cash to shareholders.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 3 KWS SAAT SE KGaA analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.