Stemmer Imaging (ETR:S9I) Will Pay A Larger Dividend Than Last Year At €3.00

Stemmer Imaging AG (ETR:S9I) will increase its dividend on the 17th of May to €3.00, which is 300% higher than last year's payment from the same period of €0.75. This makes the dividend yield 1.7%, which is above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Stemmer Imaging's stock price has increased by 35% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Stemmer Imaging

Stemmer Imaging Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, Stemmer Imaging's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

The next 12 months is set to see EPS grow by 32.9%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 111% over the next year.

Stemmer Imaging's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2019, the dividend has gone from €0.50 total annually to €0.75. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Stemmer Imaging has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Stemmer Imaging has grown earnings per share at 30% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Stemmer Imaging Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Stemmer Imaging is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Stemmer Imaging that investors should take into consideration. 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.