CompuGroup Medical SE KGaA (ETR:COP) Will Pay A Larger Dividend Than Last Year At €1.00

CompuGroup Medical SE & Co. KGaA's (ETR:COP) dividend will be increasing from last year's payment of the same period to €1.00 on 27th of May. This will take the dividend yield to an attractive 3.5%, providing a nice boost to shareholder returns.

See our latest analysis for CompuGroup Medical SE KGaA

CompuGroup Medical SE KGaA's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, CompuGroup Medical SE KGaA's profits didn't cover the dividend, but the company was generating enough cash instead. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Over the next year, EPS is forecast to expand by 159.2%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 47% which brings it into quite a comfortable range.

CompuGroup Medical SE KGaA Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was €0.35 in 2014, and the most recent fiscal year payment was €1.00. This means that it has been growing its distributions at 11% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. CompuGroup Medical SE KGaA's EPS has fallen by approximately 15% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On CompuGroup Medical SE KGaA's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. 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. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for CompuGroup Medical SE KGaA that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.