Carl Zeiss Meditec AG’s (ETR:AFX) dividend is being reduced from last year’s payment covering the same period to €0.60 on the 31st of March. This means that the annual payment is 1.1% of the current stock price, which is lower than what the rest of the industry is paying.
See our latest analysis for Carl Zeiss Meditec
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Carl Zeiss Meditec was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to rise by 79.5% over the next year. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.
The company’s dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was €0.40, compared to the most recent full-year payment of €0.60. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. We’re glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
With a relatively unstable dividend, it’s even more important to see if earnings per share is growing. However, Carl Zeiss Meditec’s EPS was effectively flat over the past five years, which could stop the company from paying more every year.
Overall, it’s not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The payments haven’t been particularly stable and we don’t see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 3 warning signs for Carl Zeiss Meditec that investors should know about before committing capital to this stock. 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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