Investors In BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- (FRA:BLH) Should Consider This, First

Is BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- (FRA:BLH) a good dividend stock? How can we tell? Dividend paying companies with growing earnings can be highly rewarding in the long term. Yet sometimes, investors buy a stock for its dividend and lose money because the share price falls by more than they earned in dividend payments.

In this case, BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- likely looks attractive to investors, given its 3.4% dividend yield and a payment history of over ten years. We'd guess that plenty of investors have purchased it for the income. Some simple analysis can reduce the risk of holding BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- for its dividend, and we'll focus on the most important aspects below.

Explore this interactive chart for our latest analysis on BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-!

Payout ratios

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. Looking at the data, we can see that 106% of BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s profits were paid out as dividends in the last 12 months. A payout ratio above 100% is definitely an item of concern, unless there are some other circumstances that would justify it.

Remember, you can always get a snapshot of BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s latest financial position, by checking our visualisation of its financial health.

Dividend Volatility

One of the major risks of relying on dividend income, is the potential for a company to struggle financially and cut its dividend. Not only is your income cut, but the value of your investment declines as well - nasty. BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- has been paying dividends for a long time, but for the purpose of this analysis, we only examine the past 10 years of payments. The dividend has been stable over the past 10 years, which is great. We think this could suggest some resilience to the business and its dividends. During the past 10-year period, the first annual payment was €0.3 in 2011, compared to €0.4 last year. This works out to be a compound annual growth rate (CAGR) of approximately 2.9% a year over that time.

Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth Potential

Dividend payments have been consistent over the past few years, but we should always check if earnings per share (EPS) are growing, as this will help maintain the purchasing power of the dividend. It's not great to see that BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s have fallen at approximately 2.8% over the past five years. Declining earnings per share over a number of years is not a great sign for the dividend investor. Without some improvement, this does not bode well for the long term value of a company's dividend.

Conclusion

When we look at a dividend stock, we need to form a judgement on whether the dividend will grow, if the company is able to maintain it in a wide range of economic circumstances, and if the dividend payout is sustainable. BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- is paying out a larger percentage of its profit than we're comfortable with. Moreover, earnings have been shrinking. While the dividends have been fairly steady, we'd wonder for how much longer this will be sustainable if earnings continue to decline. To conclude, we've spotted a couple of potential concerns with BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- that may make it less than ideal candidate for dividend investors.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 6 warning signs for BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- that you should be aware of before investing.

We have also put together a list of global stocks with a market capitalisation above $1bn and yielding more 3%.

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This article by Simply Wall St is general in nature. 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.
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