CeoTronics (FRA:CEK) Has Announced That It Will Be Increasing Its Dividend To €0.15

The board of CeoTronics AG (FRA:CEK) has announced that it will be increasing its dividend by 25% on the 9th of November to €0.15, up from last year's comparable payment of €0.12. This takes the annual payment to 2.4% of the current stock price, which is about average for the industry.

View our latest analysis for CeoTronics

CeoTronics' Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, CeoTronics' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to fall by 0.01%. If the dividend continues along recent trends, we estimate the payout ratio could be 48%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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 €0.10 in 2012, and the most recent fiscal year payment was €0.12. This works out to be a compound annual growth rate (CAGR) of approximately 1.8% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. CeoTronics has seen EPS rising for the last five years, at 15% per annum. CeoTronics definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While CeoTronics is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Just as an example, we've come across 3 warning signs for CeoTronics you should be aware of, and 1 of them doesn't sit too well with us. Is CeoTronics not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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