Carl Zeiss Meditec's (ETR:AFX) Shareholders Will Receive A Bigger Dividend Than Last Year

Carl Zeiss Meditec AG (ETR:AFX) will increase its dividend from last year's comparable payment on the 27th of March to €1.10. This takes the annual payment to 0.8% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Carl Zeiss Meditec

Carl Zeiss Meditec's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. But before making this announcement, Carl Zeiss Meditec's earnings quite easily covered the dividend. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

The next year is set to see EPS grow by 26.9%. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

Carl Zeiss Meditec Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of €0.40 in 2013 to the most recent total annual payment of €1.10. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Carl Zeiss Meditec has grown earnings per share at 16% per year over the past five years. Carl Zeiss Meditec definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Carl Zeiss Meditec's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. On the plus side, the dividend looks sustainable by most measures but it is let down by the lack of cash flows. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 11 Carl Zeiss Meditec analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Carl Zeiss Meditec not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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