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AIXTRON SE's (ETR:AIXA) dividend is being reduced from last year's payment covering the same period to €0.15 on the 20th of May. However, the dividend yield of 1.2% still remains in a typical range for the industry.
AIXTRON's Future Dividend Projections Appear Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. AIXTRON is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
The next year is set to see EPS grow by 18.6%. 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.
Check out our latest analysis for AIXTRON
AIXTRON's Dividend Has Lacked Consistency
The track record isn't the longest, but we are already seeing a bit of instability in the payments. The annual payment during the last 4 years was €0.11 in 2021, and the most recent fiscal year payment was €0.15. This means that it has been growing its distributions at 8.1% per annum 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
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that AIXTRON has grown earnings per share at 34% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright 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. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. 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. For example, we've picked out 1 warning sign for AIXTRON that investors should know about before committing capital to this stock. 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.