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The board of Elmos Semiconductor SE (ETR:ELG) has announced that it will be paying its dividend of €1.00 on the 20th of May, an increased payment from last year's comparable dividend. This takes the dividend yield to 1.5%, which shareholders will be pleased with.
Elmos Semiconductor's Payment Could Potentially Have Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. But before making this announcement, Elmos Semiconductor's earnings quite easily covered the dividend. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.
Over the next year, EPS is forecast to fall by 2.7%. If the dividend continues along recent trends, we estimate the payout ratio could be 16%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
See our latest analysis for Elmos Semiconductor
Elmos Semiconductor Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from €0.25 total annually to €1.00. This means that it has been growing its distributions at 15% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Elmos Semiconductor has grown earnings per share at 50% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
In Summary
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. On the plus side, the dividend looks sustainable by most measures but it is let down by the lack of cash flows. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 7 Elmos Semiconductor analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield 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.