Liechtensteinische Landesbank's (VTX:LLBN) Dividend Will Be Increased To CHF2.80

The board of Liechtensteinische Landesbank Aktiengesellschaft (VTX:LLBN) has announced that the dividend on 25th of April will be increased to CHF2.80, which will be 3.7% higher than last year's payment of CHF2.70 which covered the same period. This makes the dividend yield about the same as the industry average at 3.4%.

Check out our latest analysis for Liechtensteinische Landesbank

Liechtensteinische Landesbank's Earnings Will Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Liechtensteinische Landesbank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Liechtensteinische Landesbank's payout ratio of 50% is a good sign as this means that earnings decently cover dividends.

If the trend of the last few years continues, EPS will grow by 7.7% over the next 12 months. If the dividend continues along recent trends, we estimate the future payout ratio will be 50%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was CHF1.50, compared to the most recent full-year payment of CHF2.70. This implies that the company grew its distributions at a yearly rate of about 6.1% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Liechtensteinische Landesbank Could Grow Its 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. Liechtensteinische Landesbank has seen EPS rising for the last five years, at 7.7% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen 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. 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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