thyssenkrupp AG's (ETR:TKA) investors are due to receive a payment of €0.15 per share on 7th of February. Including this payment, the dividend yield on the stock will be 2.1%, which is a modest boost for shareholders' returns.
See our latest analysis for thyssenkrupp
thyssenkrupp's Earnings Easily Cover The Distributions
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, thyssenkrupp was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 0.6%, which makes us pretty comfortable with the sustainability of the dividend.
thyssenkrupp's Dividend Has Lacked Consistency
It's comforting to see that thyssenkrupp has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of €0.11 in 2014 to the most recent total annual payment of €0.15. This implies that the company grew its distributions at a yearly rate of about 3.5% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
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 thyssenkrupp has been growing its earnings per share at 20% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
We Really Like thyssenkrupp's Dividend
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for thyssenkrupp that investors should take into consideration. Is thyssenkrupp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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