Gerresheimer AG (ETR:GXI) has announced that it will pay a dividend of €1.25 per share on the 13th of June. Based on this payment, the dividend yield on the company's stock will be 1.9%, which is an attractive boost to shareholder returns.
View our latest analysis for Gerresheimer
Gerresheimer's Earnings Easily Cover the Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last dividend, Gerresheimer is earning enough to cover the payment, but the it makes up 1,072% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.
The next year is set to see EPS grow by 47.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.
Gerresheimer Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the first annual payment was €0.60, compared to the most recent full-year payment of €1.25. This means that it has been growing its distributions at 7.6% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
Gerresheimer Could Grow Its Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Gerresheimer has grown earnings per share at 8.8% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Gerresheimer's payments, as there could be some issues with sustaining them into the future. While Gerresheimer is earning enough to cover the payments, the cash flows are lacking. We don't think Gerresheimer 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Gerresheimer that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
About XTRA:GXI
Gerresheimer
Manufactures and sells medicine packaging, drug delivery devices, and solutions in Germany and internationally.
Undervalued with reasonable growth potential and pays a dividend.