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Wacker Chemie's (ETR:WCH) Dividend Will Be Increased To €12.00

Wacker Chemie AG's (ETR:WCH) dividend will be increasing from last year's payment of the same period to €12.00 on 23rd of May. This will take the dividend yield to an attractive 8.7%, providing a nice boost to shareholder returns.

Check out our latest analysis for Wacker Chemie

Wacker Chemie Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment was quite easily covered by earnings, but it made up 129% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

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Looking forward, earnings per share is forecast to fall by 42.7% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 135%, which is definitely a bit high to be sustainable going forward.

historic-dividend
historic-dividend

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from €0.60 total annually to €12.00. This implies that the company grew its distributions at a yearly rate of about 35% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Wacker Chemie has impressed us by growing EPS at 28% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Wacker Chemie is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

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. For example, we've identified 2 warning signs for Wacker Chemie (1 is significant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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