Fielmann Group (ETR:FIE) Will Pay A Larger Dividend Than Last Year At €1.00

The board of Fielmann Group AG (ETR:FIE) has announced that it will be paying its dividend of €1.00 on the 16th of July, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 2.3%, which is in line with the average for the industry.

Check out our latest analysis for Fielmann Group

Fielmann Group's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Fielmann Group's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 49.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 41% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was €1.45 in 2014, and the most recent fiscal year payment was €1.00. This works out to be a decline of approximately 3.6% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, Fielmann Group's earnings per share has shrunk at approximately 5.3% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Fielmann Group that investors should take into consideration. Is Fielmann Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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