Fabasoft's (ETR:FAA) Dividend Will Be €0.10

Fabasoft AG's (ETR:FAA) investors are due to receive a payment of €0.10 per share on 17th of July. Including this payment, the dividend yield on the stock will be 0.6%, which is a modest boost for shareholders' returns.

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Fabasoft's Future Dividend Projections Appear Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Fabasoft was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 31.8%. If the dividend continues on this path, the payout ratio could be 9.9% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Fabasoft

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was €0.21 in 2015, and the most recent fiscal year payment was €0.10. Doing the maths, this is a decline of about 7.2% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Fabasoft May Find It Hard To Grow The Dividend

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. Earnings have grown at around 2.6% a year for the past five years, which isn't massive but still better than seeing them shrink. While EPS growth is quite low, Fabasoft has the option to increase the payout ratio to return more cash to shareholders.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Fabasoft that investors should know about before committing capital to this stock. 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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