Mensch und Maschine Software (ETR:MUM) Has Announced That It Will Be Increasing Its Dividend To €1.20

Mensch und Maschine Software SE (ETR:MUM) will increase its dividend on the 9th of June to €1.20. The announced payment will take the dividend yield to 2.1%, which is in line with the average for the industry.

See our latest analysis for Mensch und Maschine Software

Mensch und Maschine Software Is Paying Out More Than It Is Earning

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Mensch und Maschine Software's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

EPS is set to grow by 25.5% over the next year if recent trends continue. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 95% over the next year.

Mensch und Maschine Software Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from €0.10 in 2012 to the most recent annual payment of €1.20. This works out to be a compound annual growth rate (CAGR) of approximately 28% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth Could Be Constrained

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Mensch und Maschine Software has impressed us by growing EPS at 25% per year over the past five years. EPS has been growing well, but Mensch und Maschine Software has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

Our Thoughts On Mensch und Maschine Software's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Mensch und Maschine Software's payments are rock solid. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think Mensch und Maschine Software is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Mensch und Maschine Software that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.