Aurubis AG (ETR:NDA) will increase its dividend from last year's comparable payment on the 21st of February to €1.80. This takes the annual payment to 1.9% of the current stock price, which unfortunately is below what the industry is paying.
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 Aurubis' stock price has increased by 51% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Check out our latest analysis for Aurubis
Aurubis' Earnings Easily Cover The Distributions
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Aurubis was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
Looking forward, earnings per share is forecast to fall by 47.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 21%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Aurubis Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was €1.35, compared to the most recent full-year payment of €1.80. 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 impressed us by growing EPS at 18% per year over the past five years. Aurubis definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Our Thoughts On Aurubis' Dividend
Overall, we always like to see the dividend being raised, but we don't think Aurubis will make a great income stock. While Aurubis is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
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. To that end, Aurubis has 3 warning signs (and 2 which are a bit concerning) we think you should know about. 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:NDA
Flawless balance sheet and undervalued.
