Yahoo Finance Is It Worth Considering Frequentis AG (ETR:FQT) For Its Upcoming Dividend?
It looks like Frequentis AG (ETR:FQT) is about to go ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 15th of May will not receive the dividend, which will be paid on the 19th of May.
Frequentis's next dividend payment will be €0.15 per share, on the back of last year when the company paid a total of €0.15 to shareholders. Based on the last year's worth of payments, Frequentis has a trailing yield of 0.9% on the current stock price of €17.5. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Frequentis can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Frequentis
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Frequentis paid out just 16% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 10% of its cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. To our modest chagrin, Frequentis earnings per share have been effectively flat over the past year. Growth is a prerequisite for an outstanding dividend company over the long term, but we wouldn't read too much into flat numbers over any one year time frame.
Frequentis also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
This is Frequentis's first year of paying a dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.
Final Takeaway
Is Frequentis worth buying for its dividend? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. All things considered, we are not particularly enthused about Frequentis from a dividend perspective.
Ever wonder what the future holds for Frequentis? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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