thyssenkrupp (ETR:TKA) Has Announced A Dividend Of €0.15

thyssenkrupp AG (ETR:TKA) has announced that it will pay a dividend of €0.15 per share on the 7th of February. Including this payment, the dividend yield on the stock will be 2.4%, which is a modest boost for shareholders' returns.

View our latest analysis for thyssenkrupp

thyssenkrupp's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. thyssenkrupp is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 0.6%, which makes us pretty comfortable with the sustainability of the dividend.

thyssenkrupp's Dividend Has Lacked Consistency

It's comforting to see that thyssenkrupp has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of €0.11 in 2014 to the most recent total annual payment of €0.15. This works out to be a compound annual growth rate (CAGR) of approximately 3.5% 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that thyssenkrupp has been growing its earnings per share at 20% a 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.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for thyssenkrupp that investors should know about before committing capital to this stock. Is thyssenkrupp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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