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The board of Frequentis AG (ETR:FQT) has announced that it will be paying its dividend of €0.27 on the 16th of June, an increased payment from last year's comparable dividend. This takes the annual payment to 0.7% of the current stock price, which unfortunately is below what the industry is paying.
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 Frequentis' stock price has increased by 35% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Frequentis' Future Dividend Projections Appear Well Covered By Earnings
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Frequentis' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 68.0%. If the dividend continues on this path, the payout ratio could be 12% by next year, which we think can be pretty sustainable going forward.
Check out our latest analysis for Frequentis
Frequentis Doesn't Have A Long Payment History
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 5 years was €0.15 in 2020, and the most recent fiscal year payment was €0.27. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
Frequentis May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. However, Frequentis has only grown its earnings per share at 4.5% per annum over the past five years. While growth may be thin on the ground, Frequentis could always pay out a higher proportion of earnings to increase shareholder returns.
Our Thoughts On Frequentis' Dividend
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.