Fresenius SE KGaA (ETR:FRE) Is Paying Out A Larger Dividend Than Last Year

Fresenius SE & Co. KGaA's (ETR:FRE) dividend will be increasing to €0.92 on 13th of June. Based on the announced payment, the dividend yield for the company will be 2.8%, which is fairly typical for the industry.

See our latest analysis for Fresenius SE KGaA

Fresenius SE KGaA's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Fresenius SE KGaA's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 5.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.

Fresenius SE KGaA Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from €0.32 in 2012 to the most recent annual payment of €0.92. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. 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's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings per share has been crawling upwards at 2.7% per year. 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.

Fresenius SE KGaA Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Fresenius SE KGaA is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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. 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.