Dätwyler Holding AG( VTX:DAE ) has announced that it will pay a dividend of CHF3.20 per share on the 23rd of March. This payment means that the dividend yield will be 1.9%, which is around the industry average.
Dätwyler Holding's Projected Earnings Seem Likely To Cover Future Distributions
Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Dätwyler Holding's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 66.4%. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.
Check out our latest analysis for Dätwyler Holding
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2016, the dividend has gone from CHF2.20 total annually to CHF3.20. This implies that the company grew its distributions at a yearly rate of about 3.8% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
Dividend Growth Is Doubtful
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, Dätwyler Holding's earnings per share has shrunk at approximately 5.1% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.
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 instance, we've picked out 2 warning signs for Dätwyler Holding that investors should take into consideration. 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.
