Frequentis (ETR:FQT) Will Pay A Larger Dividend Than Last Year At €0.27

Simply Wall St · 03/13 04:13

The board of Frequentis AG (ETR:FQT) has announced that it will be increasing its dividend by 13% on the 16th of June to €0.27, up from last year's comparable payment of €0.24. This takes the annual payment to 0.7% of the current stock price, which unfortunately is below what the industry is paying.

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. Investors will be pleased to see that Frequentis' stock price has increased by 35% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Frequentis

Frequentis' Future Dividend Projections Appear Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Frequentis' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 68.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 12%, which is in the range that makes us comfortable with the sustainability of the dividend.

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XTRA:FQT Historic Dividend March 13th 2025

Frequentis Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 5 years was €0.15 in 2020, and the most recent fiscal year payment was €0.24. This means that it has been growing its distributions at 9.9% per annum over that time. Frequentis has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

Frequentis May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Earnings have grown at around 4.5% a year for the past five years, which isn't massive but still better than seeing them shrink. While EPS growth is quite low, Frequentis has the option to increase the payout ratio to return more cash to shareholders.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 4 Frequentis analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.