Banque Cantonale Vaudoise's (VTX:BCVN) Upcoming Dividend Will Be Larger Than Last Year's

Banque Cantonale Vaudoise (VTX:BCVN) will increase its dividend on the 11th of May to CHF3.70. This will take the annual payment from 4.5% to 4.5% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Banque Cantonale Vaudoise

Banque Cantonale Vaudoise's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Banque Cantonale Vaudoise's dividend was making up a very large proportion of earnings, and the company was also not generating any cash flow to offset this. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Over the next year, EPS could expand by 4.2% if the company continues along the path it has been on recently. If recent patterns in the dividend continue, the payout ratio in 12 months could be 89% which is a bit high but can definitely be sustainable.

Banque Cantonale Vaudoise Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the first annual payment was CHF3.20, compared to the most recent full-year payment of CHF3.70. This means that it has been growing its distributions at 1.5% 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. Earnings has been rising at 4.2% per annum over the last five years, which admittedly is a bit slow. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

Banque Cantonale Vaudoise's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Banque Cantonale Vaudoise will make a great income stock. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. 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. However, there are other things to consider for investors when analysing stock performance. To that end, Banque Cantonale Vaudoise has 3 warning signs (and 2 which are concerning) we think you should know about. Is Banque Cantonale Vaudoise not quite the opportunity you were looking for? Why not check out our selection of top 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.