Banque Cantonale Vaudoise (VTX:BCVN) Is Increasing Its Dividend To CHF4.40

The board of Banque Cantonale Vaudoise (VTX:BCVN) has announced that it will be paying its dividend of CHF4.40 on the 14th of May, an increased payment from last year's comparable dividend. This makes the dividend yield 4.7%, which is above the industry average.

See our latest analysis for Banque Cantonale Vaudoise

Banque Cantonale Vaudoise's Dividend Forecasted To Be Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Banque Cantonale Vaudoise has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Banque Cantonale Vaudoise's payout ratio of 79% is a good sign as this means that earnings decently cover dividends.

Earnings per share could rise by 3.9% over the next year if things go the same way as they have for the last few years. If the dividend continues along recent trends, we estimate the future payout ratio could reach 89%, which is on the higher side, but certainly still feasible.

Banque Cantonale Vaudoise Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from CHF3.20 total annually to CHF4.40. This means that it has been growing its distributions at 3.2% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Banque Cantonale Vaudoise has only grown its earnings per share at 3.9% per annum over the past five years. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Banque Cantonale Vaudoise will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Are management backing themselves to deliver performance? Check their shareholdings in Banque Cantonale Vaudoise in our latest insider ownership analysis. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.