The board of Aurubis AG (ETR:NDA) has announced that it will be increasing its dividend on the 22nd of February to €1.60. This takes the annual payment to 1.7% of the current stock price, which unfortunately is below what the industry is paying.
Check out our latest analysis for Aurubis
Aurubis' Dividend Is Well Covered By Earnings
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Aurubis' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to fall by 55.2% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 26%, which is comfortable for the company to continue in the future.
Aurubis Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the first annual payment was €1.20, compared to the most recent full-year payment of €1.60. This means that it has been growing its distributions at 2.9% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. Aurubis has seen EPS rising for the last five years, at 39% 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.
Aurubis Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Aurubis is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Aurubis that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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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:NDA
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