Liechtensteinische Landesbank's (VTX:LLBN) Shareholders Will Receive A Bigger Dividend Than Last Year

Liechtensteinische Landesbank Aktiengesellschaft (VTX:LLBN) has announced that it will be increasing its dividend on the 12th of May to CHF2.30. This makes the dividend yield about the same as the industry average at 4.3%.

See our latest analysis for Liechtensteinische Landesbank

Liechtensteinische Landesbank's Earnings Easily Cover the Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by Liechtensteinische Landesbank's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 31.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 44%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the first annual payment was CHF0.30, compared to the most recent full-year payment of CHF2.30. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been crawling upwards at 4.5% per year. The company has been growing at a pretty soft 4.5% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Liechtensteinische Landesbank that investors need to be conscious of moving forward. 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.