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Frequentis AG (ETR:FQT) will increase its dividend from last year's comparable payment on the 7th of June to €0.22. This takes the annual payment to 0.7% of the current stock price, which unfortunately is below what the industry is paying.
View our latest analysis for Frequentis
Frequentis' Earnings Easily Cover The Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Frequentis' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to rise by 27.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 11%, which is in the range that makes us comfortable with the sustainability of the dividend.
Frequentis Is Still Building Its Track Record
The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. Since 2020, the dividend has gone from €0.15 total annually to €0.22. This means that it has been growing its distributions at 14% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings have grown at around 4.9% a year for the past three years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, Frequentis could always pay out a higher proportion of earnings to increase shareholder returns.
Our Thoughts On Frequentis' Dividend
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Frequentis that investors should know about before committing capital to this stock. Is Frequentis not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.