Yahoo Finance Fresenius Medical Care (ETR:FME) Is Increasing Its Dividend To €1.19
Fresenius Medical Care AG (ETR:FME) will increase its dividend from last year's comparable payment on the 21st of May to €1.19. The payment will take the dividend yield to 3.4%, which is in line with the average for the industry.
See our latest analysis for Fresenius Medical Care
Fresenius Medical Care's Dividend Is Well Covered By Earnings
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Fresenius Medical Care was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, earnings per share is forecast to rise by 130.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% by next year, which is in a pretty sustainable range.
Fresenius Medical Care 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. Since 2014, the annual payment back then was €0.77, compared to the most recent full-year payment of €1.19. This works out to be a compound annual growth rate (CAGR) of approximately 4.4% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
Dividend Growth Potential Is Shaky
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Over the past five years, it looks as though Fresenius Medical Care's EPS has declined at around 23% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. 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.
Our Thoughts On Fresenius Medical Care's Dividend
Overall, this is a reasonable dividend, and it being raised is an added bonus. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
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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