Elmos Semiconductor (ETR:ELG) Is Increasing Its Dividend To €1.00

The board of Elmos Semiconductor SE (ETR:ELG) has announced that the dividend on 20th of May will be increased to €1.00, which will be 18% higher than last year's payment of €0.85 which covered the same period. The payment will take the dividend yield to 1.3%, which is in line with the average for the industry.

Elmos Semiconductor's Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Elmos Semiconductor was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to fall by 22.5% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 19%, which we are pretty comfortable with and we think is feasible on an earnings basis.

View our latest analysis for Elmos Semiconductor

Elmos Semiconductor Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was €0.25 in 2015, and the most recent fiscal year payment was €0.85. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Elmos Semiconductor has impressed us by growing EPS at 51% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Elmos Semiconductor's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Elmos Semiconductor's payments are rock solid. While Elmos Semiconductor is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

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 example, we've picked out 2 warning signs for Elmos Semiconductor that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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