Siemens Healthineers AG (ETR:SHL) has announced that it will be increasing its dividend from last year's comparable payment on the 20th of February to €0.95. The payment will take the dividend yield to 1.8%, which is in line with the average for the industry.
Siemens Healthineers' Earnings Easily Cover The Distributions
Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Siemens Healthineers 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 36.4% over the next year. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.
Siemens Healthineers Doesn't Have A Long Payment History
The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. Since 2018, the annual payment back then was €0.70, compared to the most recent full-year payment of €0.95. This implies that the company grew its distributions at a yearly rate of about 7.9% over that duration. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Siemens Healthineers to be a consistent dividend paying stock.
Siemens Healthineers Could Grow Its Dividend
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Siemens Healthineers has been growing its earnings per share at 5.7% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.
Our Thoughts On Siemens Healthineers' Dividend
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Siemens Healthineers (1 is a bit concerning!) 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.
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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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