SCHOTT Pharma AG & Co. KGaA's( ETR:1SXP ) dividend will be increasing from last year's payment of the same period to €0.18 on 6th of February. This takes the dividend yield to 1.2%, which shareholders will be pleased with.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. SCHOTT Pharma KGaA's stock price has reduced by 32% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.
SCHOTT Pharma KGaA's Payment Could Potentially Have Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, based ont he last payment, SCHOTT Pharma KGaA was earning enough to cover the dividend pretty comfortably. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.
Over the next year, EPS is forecast to expand by 33.2%. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.
View our latest analysis for SCHOTT Pharma KGaA
SCHOTT Pharma KGaA Is Still Building Its Track Record
Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of €0.15 in 2023 to the most recent total annual payment of €0.18. This implies that the company grew its distributions at a yearly rate of about 9.5% over that duration. SCHOTT Pharma KGaA has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that SCHOTT Pharma KGaA has been growing its earnings per share at 14% a year over the past five years. SCHOTT Pharma KGaA definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think SCHOTT Pharma KGaA's payments are rock solid. While SCHOTT Pharma KGaA is earning enough to cover the dividend, we are generally unimpressed with its future prospects. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 11 SCHOTT Pharma KGaA analysts we track are forecasting continued growth with our free report on analyst estimates for the company . Is SCHOTT Pharma KGaA not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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