Yahoo Finance Wacker Chemie AG (ETR:WCH) Passed Our Checks, And It's About To Pay A €12.00 Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Wacker Chemie AG (ETR:WCH) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Wacker Chemie's shares before the 18th of May in order to be eligible for the dividend, which will be paid on the 22nd of May.
The company's next dividend payment will be €12.00 per share, and in the last 12 months, the company paid a total of €12.00 per share. Based on the last year's worth of payments, Wacker Chemie has a trailing yield of 8.5% on the current stock price of €140.75. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Wacker Chemie can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Wacker Chemie
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Wacker Chemie's payout ratio is modest, at just 48% of profit. A useful secondary check can be to evaluate whether Wacker Chemie generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (85%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It's positive to see that Wacker Chemie's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Wacker Chemie has grown its earnings rapidly, up 34% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Wacker Chemie has delivered an average of 35% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Is Wacker Chemie worth buying for its dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Wacker Chemie looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Wacker Chemie for the dividends alone, you should always be mindful of the risks involved. For example, Wacker Chemie has 2 warning signs (and 1 which is concerning) we think you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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