The board of AlzChem Group AG (ETR:ACT) has announced that it will be paying its dividend of €1.05 on the 16th of May, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 5.2%, which is fairly typical for the industry.
View our latest analysis for AlzChem Group
AlzChem Group's Dividend Is Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. AlzChem Group is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
Over the next year, EPS is forecast to expand by 0.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which is in the range that makes us comfortable with the sustainability of the dividend.
AlzChem Group's Dividend Has Lacked Consistency
AlzChem Group has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The annual payment during the last 5 years was €1.10 in 2018, and the most recent fiscal year payment was €1.05. Payments have been decreasing at a very slow pace in this time period. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend Has Growth Potential
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. AlzChem Group has seen EPS rising for the last five years, at 7.9% per annum. AlzChem Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Our Thoughts On AlzChem Group's Dividend
In summary, while it's always good to see the dividend being raised, we don't think AlzChem Group's payments are rock solid. While AlzChem Group is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for AlzChem Group (3 can't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
About XTRA:ACT
AlzChem Group
Develops, produces, and trades chemical products in Germany, European Union, rest of Europe, Asia, NAFTA region, and internationally.
Very undervalued with outstanding track record.
