Mensch und Maschine Software (ETR:MUM) Is Increasing Its Dividend To €1.85

Mensch und Maschine Software SE (ETR:MUM) has announced that it will be increasing its periodic dividend on the 13th of May to €1.85, which will be 12% higher than last year's comparable payment amount of €1.65. This takes the dividend yield to 3.3%, which shareholders will be pleased with.

See our latest analysis for Mensch und Maschine Software

Mensch und Maschine Software's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Mensch und Maschine Software's dividend made up quite a large proportion of earnings but only 61% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Over the next year, EPS is forecast to expand by 37.9%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 86% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Mensch und Maschine Software Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of €0.20 in 2015 to the most recent total annual payment of €1.65. This works out to be a compound annual growth rate (CAGR) of approximately 23% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Mensch und Maschine Software's Dividend Might Lack Growth

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Mensch und Maschine Software has been growing its earnings per share at 16% a year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payments look pretty sustainable with good earnings coverage and a reasonable track record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 3 analysts we track are forecasting for Mensch und Maschine Software for free with public analyst estimates for the company. Is Mensch und Maschine Software 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.