DKSH Holding (VTX:DKSH) Has Announced That It Will Be Increasing Its Dividend To CHF2.35

DKSH Holding AG (VTX:DKSH) will increase its dividend from last year's comparable payment on the 2nd of April to CHF2.35. This makes the dividend yield 3.2%, which is above the industry average.

View our latest analysis for DKSH Holding

DKSH Holding's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before this announcement, DKSH Holding was paying out 71% of earnings, but a comparatively small 48% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 27.2%. If the dividend continues on this path, the payout ratio could be 60% by next year, which we think can be pretty sustainable going forward.

DKSH Holding Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of CHF1.10 in 2015 to the most recent total annual payment of CHF2.35. This means that it has been growing its distributions at 7.9% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

DKSH Holding May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, DKSH Holding has only grown its earnings per share at 4.5% per annum over the past five years. DKSH Holding's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

DKSH Holding Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that DKSH Holding is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 5 DKSH Holding analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.