The board of GFT Technologies SE (ETR:GFT) has announced that it will be increasing its dividend on the 6th of June to €0.35. Although the dividend is now higher, the yield is only 0.9%, which is below the industry average.
Check out our latest analysis for GFT Technologies
GFT Technologies' Dividend Is Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. However, GFT Technologies' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 28.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from €0.15 in 2012 to the most recent annual payment of €0.35. This means that it has been growing its distributions at 8.8% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
The Dividend's Growth Prospects Are Limited
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings have grown at around 4.3% a year for the past five years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, GFT Technologies could always pay out a higher proportion of earnings to increase shareholder returns.
In Summary
Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 4 analysts we track are forecasting for GFT Technologies for free with public analyst estimates for the company. 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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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.
About XTRA:GFT
Undervalued with excellent balance sheet and pays a dividend.
