AlzChem Group's (ETR:ACT) Dividend Will Be Increased To €1.80

AlzChem Group AG (ETR:ACT) will increase its dividend from last year's comparable payment on the 13th of May to €1.80. Although the dividend is now higher, the yield is only 1.5%, which is below the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that AlzChem Group's stock price has increased by 87% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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AlzChem Group's Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, AlzChem Group's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 49.5%. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for AlzChem Group

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 makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 7 years was €1.10 in 2018, and the most recent fiscal year payment was €1.80. This means that it has been growing its distributions at 7.3% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. AlzChem Group has seen EPS rising for the last five years, at 27% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like AlzChem Group's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. As an example, we've identified 1 warning sign for AlzChem Group that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.