CeoTronics' (FRA:CEK) Upcoming Dividend Will Be Larger Than Last Year's

The board of CeoTronics AG (FRA:CEK) has announced that it will be paying its dividend of €0.20 on the 12th of November, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.4%, which is below the industry average.

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CeoTronics' Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, CeoTronics' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 61.8% over the next year. 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.

View our latest analysis for CeoTronics

CeoTronics' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the dividend has gone from €0.05 total annually to €0.20. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. CeoTronics has seen EPS rising for the last five years, at 19% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like CeoTronics' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for CeoTronics that investors should know about before committing capital to this stock. Is CeoTronics not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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