Fresenius Medical Care (ETR:FME) Will Pay A Larger Dividend Than Last Year At €1.19
Fresenius Medical Care AG's (ETR:FME) dividend will be increasing from last year's payment of the same period to €1.19 on 21st of May. The payment will take the dividend yield to 3.2%, which is in line with the average for the industry.
See our latest analysis for Fresenius Medical Care
Fresenius Medical Care's Earnings Easily Cover The Distributions
Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by Fresenius Medical Care's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
The next year is set to see EPS grow by 130.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.
Fresenius Medical Care Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was €0.77 in 2014, and the most recent fiscal year payment was €1.19. This implies that the company grew its distributions at a yearly rate of about 4.4% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
The Dividend Has Limited Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 23% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into 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.
In Summary
Overall, this is a reasonable dividend, and it being raised is an added bonus. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 Fresenius Medical Care that investors should know about before committing capital to this stock. Is Fresenius Medical Care not quite the opportunity you were looking for? Why not check out our selection of top 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.
