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The board of DEUTZ Aktiengesellschaft (ETR:DEZ) has announced that it will pay a dividend of €0.17 per share on the 13th of May. This means that the annual payment will be 3.0% of the current stock price, which is in line with the average for the industry.
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 DEUTZ's stock price has increased by 41% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
DEUTZ's Projected Earnings Seem Likely To Cover Future Distributions
We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, DEUTZ was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.
Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 17%, so there isn't too much pressure on the dividend.
View our latest analysis for DEUTZ
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from €0.07 total annually to €0.17. This means that it has been growing its distributions at 9.3% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
Dividend Growth May Be Hard To Come By
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. DEUTZ has seen earnings per share falling at 6.9% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
Our Thoughts On DEUTZ's Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.