Infineon Technologies (ETR:IFX) Is Paying Out A Dividend Of €0.35

Infineon Technologies AG (ETR:IFX) has announced that it will pay a dividend of €0.35 per share on the 25th of February. This payment means that the dividend yield will be 1.1%, which is around the industry average.

View our latest analysis for Infineon Technologies

Infineon Technologies' Projected Earnings Seem Likely To Cover Future Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Infineon Technologies was paying only paying out a fraction of earnings, but the payment was a massive 745% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share is forecast to rise by 72.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 16%, which is in the range that makes us comfortable with the sustainability of the dividend.

Infineon Technologies 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. Since 2015, the annual payment back then was €0.12, compared to the most recent full-year payment of €0.35. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Infineon Technologies has grown earnings per share at 12% per year over the past five years. Infineon Technologies definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Infineon Technologies' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Infineon Technologies that you should be aware of before investing. Is Infineon Technologies not quite the opportunity you were looking for? Why not check out our selection of top 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.