Noratis (ETR:NUVA) Is Increasing Its Dividend To €0.55

Noratis AG (ETR:NUVA) has announced that it will be increasing its dividend on the 28th of June to €0.55, which will be 10% higher than last year. Even though the dividend went up, the yield is still quite low at only 2.8%.

See our latest analysis for Noratis

Noratis' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Noratis was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 10.4% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be , which is comfortable for the company to continue in the future.

Noratis' Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The dividend has gone from €1.50 in 2018 to the most recent annual payment of €0.50. The dividend has fallen 67% over that period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Is Doubtful

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Noratis has seen earnings per share falling at 7.7% per year over the last three years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On Noratis' Dividend

Overall, we always like to see the dividend being raised, but we don't think Noratis will make a great income stock. 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 don't think Noratis is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Noratis (of which 2 are a bit concerning!) you should know about. 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.