The board of Softing AG (ETR:SYT) has announced that it will pay a dividend on the 9th of May, with investors receiving €0.10 per share. This payment means that the dividend yield will be 1.6%, which is around the industry average.
See our latest analysis for Softing
Softing's Dividend Is Well Covered By Earnings
We aren't too impressed by dividend yields unless they can be sustained over time. Even in the absence of profits, Softing is paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.
Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend extends its recent trend, estimates say the dividend could reach 6.7%, which we would be comfortable to see continuing.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was €0.27, compared to the most recent full-year payment of €0.10. Doing the maths, this is a decline of about 9.5% per year. A company that decreases its dividend over time generally isn't what we are looking for.
Dividend Growth Potential Is Shaky
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Earnings per share has been sinking by 53% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
Softing's Dividend Doesn't Look Great
Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Softing has 2 warning signs (and 1 which is concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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