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KION GROUP AG (ETR:KGX) will increase its dividend from last year's comparable payment on the 30th of May to €0.82. Despite this raise, the dividend yield of 1.9% is only a modest boost to shareholder returns.
View our latest analysis for KION GROUP
KION GROUP's Future Dividend Projections Appear Well Covered By Earnings
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, KION GROUP was easily earning enough to 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 62.8%. If the dividend continues on this path, the payout ratio could be 18% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was €0.35 in 2015, and the most recent fiscal year payment was €0.82. This means that it has been growing its distributions at 8.9% 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.
Dividend Growth Is Doubtful
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. KION GROUP has seen earnings per share falling at 6.6% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think KION GROUP's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 3 warning signs for KION GROUP that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.