The board of MERCK Kommanditgesellschaft auf Aktien (ETR:MRK) has announced that it will be paying its dividend of €2.20 on the 4th of May, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 1.3%.
Check out our latest analysis for MERCK Kommanditgesellschaft auf Aktien
MERCK Kommanditgesellschaft auf Aktien's Earnings Easily Cover The Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, MERCK Kommanditgesellschaft auf Aktien 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.
Looking forward, earnings per share is forecast to rise by 29.2% over the next year. If the dividend continues on this path, the payout ratio could be 24% by next year, which we think can be pretty sustainable going forward.
MERCK Kommanditgesellschaft auf Aktien Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of €0.85 in 2013 to the most recent total annual payment of €2.20. This implies that the company grew its distributions at a yearly rate of about 10.0% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
The Dividend Has Growth Potential
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that MERCK Kommanditgesellschaft auf Aktien has been growing its earnings per share at 5.5% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
We Really Like MERCK Kommanditgesellschaft auf Aktien's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 14 MERCK Kommanditgesellschaft auf Aktien 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.