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thyssenkrupp AG (ETR:TKA) has announced that it will pay a dividend of €0.15 per share on the 5th of February. This payment means that the dividend yield will be 3.8%, which is around the industry average.
See our latest analysis for thyssenkrupp
Estimates Indicate thyssenkrupp's Dividend Coverage Likely To Improve
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Even in the absence of profits, thyssenkrupp is paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.
According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 1.1%, so there isn't too much pressure on the dividend.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was €0.11, compared to the most recent full-year payment of €0.15. This means that it has been growing its distributions at 3.2% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
The Company Could Face Some Challenges Growing The Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that thyssenkrupp has grown earnings per share at 19% per year over the past five years. It's not great that the company is not turning a profit, but the decent growth in recent years is certainly a positive sign. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid dividend payer.
The Dividend Could Prove To Be Unreliable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would be a touch cautious of relying on this stock primarily for the dividend income.
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 1 warning sign for thyssenkrupp that investors should know about before committing capital to this stock. Is thyssenkrupp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.