AlzChem Group (ETR:ACT) Has Announced That It Will Be Increasing Its Dividend To €1.00

AlzChem Group AG's (ETR:ACT) dividend will be increasing on the 10th of May to €1.00, with investors receiving 30% more than last year. This makes the dividend yield about the same as the industry average at 4.4%.

See our latest analysis for AlzChem Group

AlzChem Group's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, AlzChem Group's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 8.8%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 19%, which we are pretty comfortable with and we think is feasible on an earnings basis.

AlzChem Group's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2018, the dividend has gone from €1.10 to €0.77. Doing the maths, this is a decline of about 8.5% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. AlzChem Group has seen EPS rising for the last five years, at 12% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for AlzChem Group's prospects of growing its dividend payments in the future.

AlzChem Group Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that AlzChem Group is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for AlzChem Group that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.