Fenix Outdoor International (STO:FOI B) Is Paying Out A Larger Dividend Than Last Year

The board of Fenix Outdoor International AG (STO:FOI B) has announced that it will be paying its dividend of €30.00 on the 12th of May, an increased payment from last year's comparable dividend. This takes the annual payment to 2.4% of the current stock price, which unfortunately is below what the industry is paying.

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Fenix Outdoor International's Future Dividends May Potentially Be At Risk

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, the company was paying out 120% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 24%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

EPS is set to fall by 24.9% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 4,007%, which could put the dividend under pressure if earnings don't start to improve.

Check out our latest analysis for Fenix Outdoor International

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from €0.418 total annually to €1.33. This means that it has been growing its distributions at 12% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Has Limited Growth Potential

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. Earnings per share has been sinking by 25% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Fenix Outdoor International's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Fenix Outdoor International will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

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. To that end, Fenix Outdoor International has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.