Could Deutsche Grundstücksauktionen AG (ETR:DGR) Have The Makings Of Another Dividend Aristocrat?

Could Deutsche Grundstücksauktionen AG (ETR:DGR) be an attractive dividend share to own for the long haul? Investors are often drawn to strong companies with the idea of reinvesting the dividends. Unfortunately, it's common for investors to be enticed in by the seemingly attractive yield, and lose money when the company has to cut its dividend payments.

A slim 0.8% yield is hard to get excited about, but the long payment history is respectable. At the right price, or with strong growth opportunities, Deutsche Grundstücksauktionen could have potential. There are a few simple ways to reduce the risks of buying Deutsche Grundstücksauktionen for its dividend, and we'll go through these below.

Explore this interactive chart for our latest analysis on Deutsche Grundstücksauktionen!

Payout ratios

Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. So we need to form a view on if a company's dividend is sustainable, relative to its net profit after tax. Deutsche Grundstücksauktionen paid out 45% of its profit as dividends, over the trailing twelve month period. A medium payout ratio strikes a good balance between paying dividends, and keeping enough back to invest in the business. Plus, there is room to increase the payout ratio over time.

While the above analysis focuses on dividends relative to a company's earnings, we do note Deutsche Grundstücksauktionen's strong net cash position, which will let it pay larger dividends for a time, should it choose.

We update our data on Deutsche Grundstücksauktionen every 24 hours, so you can always get our latest analysis of its financial health, here.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. For the purpose of this article, we only scrutinise the last decade of Deutsche Grundstücksauktionen's dividend payments. This dividend has been unstable, which we define as having been cut one or more times over this time. During the past 10-year period, the first annual payment was €0.6 in 2011, compared to €0.1 last year. Dividend payments have fallen sharply, down 75% over that time.

We struggle to make a case for buying Deutsche Grundstücksauktionen for its dividend, given that payments have shrunk over the past 10 years.

Dividend Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS are growing. Deutsche Grundstücksauktionen's EPS have fallen by approximately 13% per year during the past five years. With this kind of significant decline, we always wonder what has changed in the business. Dividends are about stability, and Deutsche Grundstücksauktionen's earnings per share, which support the dividend, have been anything but stable.

Conclusion

Dividend investors should always want to know if a) a company's dividends are affordable, b) if there is a track record of consistent payments, and c) if the dividend is capable of growing. We're glad to see Deutsche Grundstücksauktionen has a low payout ratio, as this suggests earnings are being reinvested in the business. Earnings per share are down, and Deutsche Grundstücksauktionen's dividend has been cut at least once in the past, which is disappointing. In summary, we're unenthused by Deutsche Grundstücksauktionen as a dividend stock. It's not that we think it is a bad company; it simply falls short of our criteria in some key areas.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 4 warning signs for Deutsche Grundstücksauktionen (of which 1 is potentially serious!) you should know about.

Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.

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This article by Simply Wall St is general in nature. 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.
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