Deutsche Lufthansa (ETR:LHA) Is Paying Out A Dividend Of €0.30

Deutsche Lufthansa AG (ETR:LHA) will pay a dividend of €0.30 on the 9th of May. This makes the dividend yield 4.1%, which will augment investor returns quite nicely.

Deutsche Lufthansa's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Deutsche Lufthansa was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 33.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

See our latest analysis for Deutsche Lufthansa

Deutsche Lufthansa's Dividend Has Lacked Consistency

Deutsche Lufthansa has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 9 years was €0.50 in 2016, and the most recent fiscal year payment was €0.30. The dividend has shrunk at around 5.5% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Deutsche Lufthansa's EPS has fallen by approximately 15% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Deutsche Lufthansa's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Deutsche Lufthansa's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Deutsche Lufthansa is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 3 warning signs for Deutsche Lufthansa that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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