Fielmann Group AG's (ETR:FIE) dividend will be increasing from last year's payment of the same period to €1.50 on 15th of July. This takes the annual payment to 2.1% of the current stock price, which is about average for the industry.

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Fielmann Group'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. Prior to this announcement, Fielmann Group's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 51.9% over the next year. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Fielmann Group

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of €1.60 in 2015 to the most recent total annual payment of €1.15. Doing the maths, this is a decline of about 3.2% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

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. However, Fielmann Group has only grown its earnings per share at 3.3% per annum over the past five years. The company has been growing at a pretty soft 3.3% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Fielmann Group that investors should know about before committing capital to this stock. Is Fielmann Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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