Gerresheimer (ETR:GXI) Is Due To Pay A Dividend Of €1.25

The board of Gerresheimer AG (ETR:GXI) has announced that it will pay a dividend on the 13th of June, with investors receiving €1.25 per share. The dividend yield will be 1.9% based on this payment which is still above the industry average.

View our latest analysis for Gerresheimer

Gerresheimer's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Gerresheimer's dividend was only 47% of earnings, however it was paying out 702% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS is forecast to expand by 42.2%. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

Gerresheimer Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was €0.60 in 2012, and the most recent fiscal year payment was €1.25. This works out to be a compound annual growth rate (CAGR) of approximately 7.6% a year 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.

Gerresheimer Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Gerresheimer has grown earnings per share at 7.7% 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.

Our Thoughts On Gerresheimer's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Gerresheimer is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Gerresheimer you should be aware of, and 1 of them is a bit concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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