Symrise (ETR:SY1) Is Increasing Its Dividend To €1.05

The board of Symrise AG (ETR:SY1) has announced that it will be increasing its dividend by 2.9% on the 15th of May to €1.05, up from last year's comparable payment of €1.02. Even though the dividend went up, the yield is still quite low at only 1.1%.

View our latest analysis for Symrise

Symrise's 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. Before making this announcement, Symrise was paying a whopping 103% as a dividend, but this only made up 35% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

The next year is set to see EPS grow by 35.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

Symrise Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was €0.62 in 2013, and the most recent fiscal year payment was €1.02. This means that it has been growing its distributions at 5.1% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Symrise has been growing its earnings per share at 7.8% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Symrise's prospects of growing its dividend payments in the future.

Our Thoughts On Symrise's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Symrise is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Symrise that investors should take into consideration. Is Symrise not quite the opportunity you were looking for? Why not check out our selection of top 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.