Investors In TTL Beteiligungs- und Grundbesitz-AG (ETR:TTO) Should Consider This, First

Could TTL Beteiligungs- und Grundbesitz-AG (ETR:TTO) 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. If you are hoping to live on the income from dividends, it's important to be a lot more stringent with your investments than the average punter.

TTL Beteiligungs- und Grundbesitz-AG yields a solid 6.5%, although it has only been paying for two years. It's certainly an attractive yield, but readers are likely curious about its staying power. Remember though, due to the recent spike in its share price, TTL Beteiligungs- und Grundbesitz-AG's yield will look lower, even though the market may now be factoring in an improvement in its long-term prospects. Some simple analysis can reduce the risk of holding TTL Beteiligungs- und Grundbesitz-AG for its dividend, and we'll focus on the most important aspects below.

Explore this interactive chart for our latest analysis on TTL Beteiligungs- und Grundbesitz-AG!

Payout ratios

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. So we need to form a view on if a company's dividend is sustainable, relative to its net profit after tax. TTL Beteiligungs- und Grundbesitz-AG paid out 161% of its profit as dividends, over the trailing twelve month period. Unless there are extenuating circumstances, from the perspective of an investor who hopes to own the company for many years, a payout ratio of above 100% is definitely a concern.

In addition to comparing dividends against profits, we should inspect whether the company generated enough cash to pay its dividend. Last year, TTL Beteiligungs- und Grundbesitz-AG paid a dividend while reporting negative free cash flow. While there may be an explanation, we think this behaviour is generally not sustainable.

Remember, you can always get a snapshot of TTL Beteiligungs- und Grundbesitz-AG's latest financial position, by checking our visualisation of its financial health.

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. The company has been paying a stable dividend for a few years now, but we'd like to see more evidence of consistency over a longer period. During the past two-year period, the first annual payment was €0.1 in 2019, compared to €0.2 last year. Dividends per share have grown at approximately 29% per year over this time.

We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Dividend Growth Potential

While dividend payments have been relatively reliable, it would also be nice if earnings per share (EPS) were growing, as this is essential to maintaining the dividend's purchasing power over the long term. It's good to see TTL Beteiligungs- und Grundbesitz-AG has been growing its earnings per share at 33% a year over the past five years. The company has been growing its EPS at a very rapid rate, while paying out virtually all of its income as dividends. While EPS could grow fast enough to make the dividend sustainable, in this type of situation, we'd want to pay extra attention to any fragilities in the company's balance sheet.

Conclusion

To summarise, shareholders should always check that TTL Beteiligungs- und Grundbesitz-AG's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. TTL Beteiligungs- und Grundbesitz-AG paid out almost all of its cash flow and profit as dividends, leaving little to reinvest in the business. Next, earnings growth has been good, but unfortunately the company has not been paying dividends as long as we'd like. In summary, TTL Beteiligungs- und Grundbesitz-AG has a number of shortcomings that we'd find it hard to get past. Things could change, but we think there are likely more attractive alternatives out there.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 6 warning signs for TTL Beteiligungs- und Grundbesitz-AG (of which 1 is significant!) you should know about.

We have also put together a list of global stocks with a market capitalisation above $1bn and yielding more 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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