Fresenius SE KGaA (ETR:FRE) Is Increasing Its Dividend To €0.92

The board of Fresenius SE & Co. KGaA (ETR:FRE) has announced that it will be increasing its dividend on the 13th of June to €0.92. This takes the annual payment to 2.7% of the current stock price, which is about average for the industry.

View our latest analysis for Fresenius SE KGaA

Fresenius SE KGaA's Earnings Easily Cover the Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Fresenius SE KGaA was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 5.0%. 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.

Fresenius SE KGaA Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from €0.32 in 2012 to the most recent annual payment of €0.92. 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.

Fresenius SE KGaA May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Fresenius SE KGaA has only grown its earnings per share at 2.7% per annum over the past five years. If Fresenius SE KGaA is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

We Really Like Fresenius SE KGaA'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. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Fresenius SE KGaA that investors should take into consideration. Is Fresenius SE KGaA not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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