Bucher Industries' (VTX:BUCN) Upcoming Dividend Will Be Larger Than Last Year's

Bucher Industries AG (VTX:BUCN) will increase its dividend from last year's comparable payment on the 25th of April to CHF13.00. This takes the dividend yield to 3.1%, which shareholders will be pleased with.

See our latest analysis for Bucher Industries

Bucher Industries' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Bucher Industries' dividend was only 40% of earnings, however it was paying out 200% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS is forecast to fall by 6.7%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 47%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Bucher Industries Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was CHF5.00 in 2013, and the most recent fiscal year payment was CHF13.00. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Bucher Industries has impressed us by growing EPS at 14% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Bucher Industries' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Bucher Industries' payments are rock solid. While Bucher Industries is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Bucher Industries (of which 2 shouldn't be ignored!) you should know about. Is Bucher Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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