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AIXTRON SE (ETR:AIXA) has announced that on 20th of May, it will be paying a dividend of€0.15, which a reduction from last year's comparable dividend. However, the dividend yield of 1.6% is still a decent boost to shareholder returns.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. AIXTRON's stock price has reduced by 34% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.
AIXTRON's Future Dividend Projections Appear Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, AIXTRON's 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.
Looking forward, earnings per share is forecast to rise by 16.3% over the next year. If the dividend continues on this path, the payout ratio could be 17% by next year, which we think can be pretty sustainable going forward.
See our latest analysis for AIXTRON
AIXTRON's Dividend Has Lacked Consistency
Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. Since 2021, the dividend has gone from €0.11 total annually to €0.15. This works out to be a compound annual growth rate (CAGR) of approximately 8.1% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. AIXTRON has seen EPS rising for the last five years, at 26% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
Our Thoughts On AIXTRON's Dividend
In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.