Siemens Aktiengesellschaft (ETR:SIE) has announced that it will be increasing its dividend from last year's comparable payment on the 18th of February to €5.20. This takes the annual payment to 2.7% of the current stock price, which is about average for the industry.
Check out our latest analysis for Siemens
We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Siemens was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 27.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 40% by next year, which is in a pretty sustainable range.
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 dividend has gone from €3.00 total annually to €5.20. This means that it has been growing its distributions at 5.7% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Siemens has been growing its earnings per share at 13% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
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. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Siemens that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.