AlzChem Group's (ETR:ACT) Dividend Will Be Increased To €1.00

AlzChem Group AG (ETR:ACT) has announced that it will be increasing its dividend on the 10th of May to €1.00. Based on the announced payment, the dividend yield for the company will be 4.3%, which is fairly typical for the industry.

View our latest analysis for AlzChem Group

AlzChem Group's Earnings Easily Cover the Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, AlzChem Group was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 9.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 21%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

AlzChem Group's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The first annual payment during the last 4 years was €1.10 in 2018, and the most recent fiscal year payment was €1.00. The dividend has shrunk at around 2.4% a year during that period. 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. AlzChem Group has impressed us by growing EPS at 12% per year over the past five years. AlzChem Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

AlzChem Group Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for AlzChem Group that investors need to be conscious of moving forward. Is AlzChem Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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