Liechtensteinische Landesbank (VTX:LLBN) Is Increasing Its Dividend To CHF2.30

Liechtensteinische Landesbank Aktiengesellschaft (VTX:LLBN) has announced that it will be increasing its dividend on the 12th of May to CHF2.30. Based on the announced payment, the dividend yield for the company will be 4.2%, which is fairly typical for the industry.

Check out our latest analysis for Liechtensteinische Landesbank

Liechtensteinische Landesbank's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Liechtensteinische Landesbank was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 31.0%. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from CHF0.30 in 2012 to the most recent annual payment of CHF2.30. This means that it has been growing its distributions at 23% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Liechtensteinische Landesbank May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. 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. Liechtensteinische Landesbank is struggling to find viable investments, so it is returning more to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

Our Thoughts On Liechtensteinische Landesbank's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Liechtensteinische Landesbank that you should be aware of before investing. Is Liechtensteinische Landesbank not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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