STINAG Stuttgart Invest (FRA:STG) Has Announced A Dividend Of €0.48

The board of STINAG Stuttgart Invest AG (FRA:STG) has announced that it will pay a dividend of €0.48 per share on the 23rd of May. This means the annual payment is 4.1% of the current stock price, which is above the average for the industry.

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Estimates Indicate STINAG Stuttgart Invest's Could Struggle to Maintain Dividend Payments In The Future

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, STINAG Stuttgart Invest's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

If the company can't turn things around, EPS could fall by 6.0% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 140%, which is definitely a bit high to be sustainable going forward.

See our latest analysis for STINAG Stuttgart Invest

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from €0.75 total annually to €0.48. Doing the maths, this is a decline of about 4.4% per year. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Come By

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. STINAG Stuttgart Invest has seen earnings per share falling at 6.0% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for STINAG Stuttgart Invest that investors need to be conscious of moving forward. 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.