MERCK Kommanditgesellschaft auf Aktien's (ETR:MRK) Dividend Will Be Increased To €2.20

The board of MERCK Kommanditgesellschaft auf Aktien (ETR:MRK) has announced that it will be increasing its dividend by 19% on the 4th of May to €2.20, up from last year's comparable payment of €1.85. Even though the dividend went up, the yield is still quite low at only 1.0%.

Check out our latest analysis for MERCK Kommanditgesellschaft auf Aktien

MERCK Kommanditgesellschaft auf Aktien's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, MERCK Kommanditgesellschaft auf Aktien's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 5.3%. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

MERCK Kommanditgesellschaft auf Aktien Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of €0.75 in 2013 to the most recent total annual payment of €1.85. This implies that the company grew its distributions at a yearly rate of about 9.4% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

We Could See MERCK Kommanditgesellschaft auf Aktien's Dividend Growing

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 MERCK Kommanditgesellschaft auf Aktien has been growing its earnings per share at 5.5% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for MERCK Kommanditgesellschaft auf Aktien's prospects of growing its dividend payments in the future.

MERCK Kommanditgesellschaft auf Aktien Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 14 MERCK Kommanditgesellschaft auf Aktien analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.