AlzChem Group's (ETR:ACT) Upcoming Dividend Will Be Larger Than Last Year's

AlzChem Group AG (ETR:ACT) has announced that it will be increasing its dividend from last year's comparable payment on the 10th of May to €1.20. Despite this raise, the dividend yield of 2.7% is only a modest boost to shareholder returns.

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 78% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for AlzChem Group

AlzChem Group's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are 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 expand by 47.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

AlzChem Group's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. Since 2018, the dividend has gone from €1.10 total annually to €1.20. This works out to be a compound annual growth rate (CAGR) of approximately 1.5% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

AlzChem Group Could Grow Its Dividend

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 8.9% 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.

We Really Like AlzChem Group's Dividend

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 company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for AlzChem Group that investors should take into consideration. 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.