AlzChem Group AG's (ETR:ACT) dividend will be increasing from last year's payment of the same period to €1.05 on 16th of May. This makes the dividend yield about the same as the industry average at 5.5%.
View our latest analysis for AlzChem Group
AlzChem Group's Dividend Is Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, AlzChem Group's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
The next year is set to see EPS grow by 9.1%. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.
AlzChem Group's Dividend Has Lacked Consistency
It's comforting to see that AlzChem Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2018, the annual payment back then was €1.10, compared to the most recent full-year payment of €1.05. The dividend has shrunk at a rate of less than 1% a year over this period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
We Could See AlzChem Group's Dividend Growing
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. AlzChem Group has seen EPS rising for the last five years, at 6.9% 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.
In Summary
Overall, we always like to see the dividend being raised, but we don't think AlzChem Group will make a great income stock. While AlzChem Group is earning enough to cover the payments, the cash flows are lacking. We don't think AlzChem Group is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for AlzChem Group (2 make us uncomfortable!) 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.
