Siemens Healthineers (ETR:SHL) Is Increasing Its Dividend To €0.95

Siemens Healthineers AG's (ETR:SHL) dividend will be increasing from last year's payment of the same period to €0.95 on 20th of February. Based on this payment, the dividend yield for the company will be 1.8%, which is fairly typical for the industry.

See our latest analysis for Siemens Healthineers

Siemens Healthineers' Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last dividend, Siemens Healthineers is earning enough to cover the payment, but then it makes up 104% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

The next year is set to see EPS grow by 40.7%. If the dividend continues on this path, the payout ratio could be 40% by next year, which we think can be pretty sustainable going forward.

Siemens Healthineers Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2019, the annual payment back then was €0.70, compared to the most recent full-year payment of €0.95. This means that it has been growing its distributions at 7.9% per annum over that time. Siemens Healthineers has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Siemens Healthineers has been growing its earnings per share at 5.8% a year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Siemens Healthineers' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Siemens Healthineers (of which 1 is a bit concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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