thyssenkrupp (ETR:TKA) Has Affirmed Its Dividend Of €0.15

The board of thyssenkrupp AG (ETR:TKA) has announced that it will pay a dividend of €0.15 per share on the 5th of February. This means that the annual payment will be 3.8% of the current stock price, which is in line with the average for the industry.

See our latest analysis for thyssenkrupp

thyssenkrupp's Long-term Dividend Outlook appears Promising

We aren't too impressed by dividend yields unless they can be sustained over time. Even though thyssenkrupp is not generating a profit, it is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 1.1%, so there isn't too much pressure on the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from €0.11 total annually to €0.15. This works out to be a compound annual growth rate (CAGR) of approximately 3.2% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Company Could Face Some Challenges Growing The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that thyssenkrupp has grown earnings per share at 19% per year over the past five years. It's not an ideal situation that the company isn't turning a profit but the growth recently is a positive sign. All is not lost, but the future of the dividend definitely rests upon the company's ability to become profitable soon.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about thyssenkrupp's payments, as there could be some issues with sustaining them into the future. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We don't think thyssenkrupp is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for thyssenkrupp that investors should take into consideration. Is thyssenkrupp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.