H&R GmbH KGaA (ETR:2HRA) Is Paying Out A Dividend Of €0.10

The board of H&R GmbH & Co. KGaA (ETR:2HRA) has announced that it will pay a dividend on the 31st of May, with investors receiving €0.10 per share. This means the annual payment will be 2.1% of the current stock price, which is lower than the industry average.

See our latest analysis for H&R GmbH KGaA

H&R GmbH KGaA's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, H&R GmbH 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.

Looking forward, earnings per share is forecast to rise by 87.6% over the next year. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

H&R GmbH KGaA's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2018, the annual payment back then was €0.40, compared to the most recent full-year payment of €0.10. Dividend payments have fallen sharply, down 75% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. H&R GmbH KGaA's EPS has fallen by approximately 13% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. 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 H&R GmbH KGaA's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for H&R GmbH KGaA that investors should know about before committing capital to this stock. Is H&R GmbH KGaA not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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