Amadeus FiRe AG (ETR:AAD) has announced that it will be increasing its periodic dividend on the 23rd of May to €4.50, which will be 48% higher than last year's comparable payment amount of €3.04. This takes the annual payment to 2.3% of the current stock price, which is about average for the industry.
Check out our latest analysis for Amadeus FiRe
Amadeus FiRe's Payment Has Solid Earnings Coverage
Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by Amadeus FiRe's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, earnings per share is forecast to rise by 43.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 44% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was €2.95, compared to the most recent full-year payment of €3.04. Its dividends have grown at less than 1% per annum over this time frame. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Amadeus FiRe has been growing its earnings per share at 11% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
Amadeus FiRe Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Amadeus FiRe 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.
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. Taking the debate a bit further, we've identified 1 warning sign for Amadeus FiRe that investors need to be conscious of moving forward. Is Amadeus FiRe not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.