The board of directors Human and machine software SE (ETR:MUM) has announced that it will pay its dividend of €1.65 on June 6, a higher payment than last year’s comparable dividend. This brings the dividend yield to 3.1%, which shareholders will be happy with.
Check out our latest analysis for human and machine software
The dividend of man and machine software is well covered by profits
While it’s great to have a strong dividend yield, we also need to consider whether the payout is sustainable. Before this announcement, Mensch und Maschine Software’s dividend was a fairly large portion of earnings, but only 62% of free cash flows. Generally speaking, cash flows are more important than profits, so we’re confident the dividend will be sustainable in the future, especially with so much money left for reinvestment.
Looking ahead, earnings per share are expected to increase by 55.3% in the coming year. Assuming the dividend continues to follow recent trends, we think the payout ratio could reach 73%, which would be quite comfortable if we were to increase the dividend.
Human and machine software has a solid track record
Even over a long history of dividend payments, the company’s payouts have been remarkably stable. The dividend has increased from an annual total of €0.20 in 2014 to the most recent total annual payment of €1.65. This means it has grown its payouts at 23% per year in that time. So the dividends have been growing quite quickly, and even more impressive is that they haven’t seen any significant declines over this period.
Human and machine software could find it difficult to grow its dividends
Investors who have held shares in the company in recent years will be happy with the dividend income they have received. We’re encouraged to see that Mensch und Maschine Software has grown earnings per share at 17% per year over the past five years. Lately, the company has managed to grow earnings at a decent pace, but with the payout ratio on the higher side, we don’t think the dividend offers much growth prospects.
Our thoughts on the dividend of human and machine software
Overall, it’s great to see the dividend being increased and still within a sustainable range. The dividend is easily covered by cash flows and has a good track record, but we think the payout ratio may be a bit high. Taking all this into account, the dividend seems feasible going forward, but investors should be aware that the company has pushed the boundaries of sustainability in the past and may do so again.
Market movements show how highly valued a consistent dividend policy is compared to one that is more unpredictable. However, there are other things investors should consider when analyzing stock performance. Taking the debate one step further, we have identified it 1 warning sign for human and machine software that investors should be aware of the progress. Is Mensch und Maschine Software not quite the option you were looking for? Take a look at our selection of top dividend stocks.
Do you have feedback on this article? Worried about the content? Please contact us directly from us. You can also email the editorial team (at) Simplywallst.com.
This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.