In This Article:
AlzChem Group AG (ETR:ACT) will increase its dividend from last year's comparable payment on the 13th of May to €1.80. Even though the dividend went up, the yield is still quite low at only 2.2%.
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. Investors will be pleased to see that AlzChem Group's stock price has increased by 32% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Check out our latest analysis for AlzChem Group
AlzChem Group's Payment Could Potentially Have Solid Earnings Coverage
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, AlzChem Group was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 49.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which is in the range that makes us comfortable with the sustainability of the dividend.
AlzChem Group's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 7 years was €1.10 in 2018, and the most recent fiscal year payment was €1.80. This implies that the company grew its distributions at a yearly rate of about 7.3% over that duration. 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
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. It's encouraging to see that AlzChem Group has been growing its earnings per share at 25% a 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.
AlzChem Group Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that AlzChem Group is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.