Eckert & Ziegler Strahlen- und Medizintechnik's (ETR:EUZ) Dividend Will Be Increased To €0.50

The board of Eckert & Ziegler Strahlen- und Medizintechnik AG (ETR:EUZ) has announced that it will be increasing its dividend by 11% on the 6th of June to €0.50. Despite this raise, the dividend yield of 0.8% is only a modest boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Eckert & Ziegler Strahlen- und Medizintechnik's stock price has reduced by 34% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

View our latest analysis for Eckert & Ziegler Strahlen- und Medizintechnik

Eckert & Ziegler Strahlen- und Medizintechnik's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Eckert & Ziegler Strahlen- und Medizintechnik's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 3.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

Eckert & Ziegler Strahlen- und Medizintechnik Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the first annual payment was €0.15, compared to the most recent full-year payment of €0.45. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

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 Eckert & Ziegler Strahlen- und Medizintechnik has grown earnings per share at 30% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Eckert & Ziegler Strahlen- und Medizintechnik's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Eckert & Ziegler Strahlen- und Medizintechnik that investors should take into consideration. 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.