AIXTRON SE (ETR:AIXA) announced that it would increase its dividend on May 30 to €0.30. This makes the dividend yield 1.5%, which is above the industry average.
Check out our latest analysis for AIXTRON
AIXTRON payment has strong revenue coverage
Impressive dividend yields are good, but that doesn’t matter much if payouts can’t be sustained. Prior to this announcement, AIXTRON’s results easily covered the dividend, but free cash flow was negative. We think cash flow should take priority over earnings, so that’s certainly a concern for the dividend going forward.
Looking ahead, earnings per share are expected to fall 8.3% over the next year. If the dividend continues on the path it has taken recently, we estimate the payout ratio could be 38%, which is comfortable for the business to continue in the future.
Although the company has a long history of dividends, it has been cut at least once in the past 10 years. Since 2012, the dividend has gone from €0.25 to €0.30. This means that it increased its distributions by 1.8% per year during this period. The dividend has had some fluctuations in the past, so even though the dividend has been increased this year, we have to remember that it has been reduced in the past.
The dividend should increase
With a relatively volatile dividend, it is even more important to assess whether earnings per share are increasing, which could indicate dividend growth in the future. AIXTRON has seen EPS increase over the past five years, at 39% per year. A low payout ratio gives the company great flexibility, and the growth in earnings also allows it to increase the dividend very easily.
In summary, while it’s always good to see the dividend increase, we don’t think AIXTRON’s payouts are strong. While AIXTRON earns enough to cover payments, cash flow is lacking. We don’t think AIXTRON is a great stock to add to your portfolio if income is your priority.
Investors generally tend to favor companies with a consistent and stable dividend policy as opposed to those with an irregular one. Meanwhile, despite the importance of dividend payments, these are not the only factors our readers should be aware of when evaluating a company. Example: we have identified 2 warning signs for AIXTRON (of which 1 is worrying!) that you should know about. Looking for more high yield dividend ideas? Try our collection of strong dividend payers.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.