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 takes the dividend yield to 3.3%, which shareholders will be pleased with.

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

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, DKSH Holding was paying out 71% of earnings, but a comparatively small 48% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Over the next year, EPS is forecast to expand by 27.9%. 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.

See our latest analysis for DKSH Holding

DKSH Holding Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was CHF1.15 in 2015, and the most recent fiscal year payment was CHF2.35. This works out to be a compound annual growth rate (CAGR) of approximately 7.4% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Earnings per share has been crawling upwards at 4.5% per year. Slow growth and a high payout ratio could mean that DKSH Holding has maxed out the amount that it has been able to pay to shareholders. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

DKSH Holding Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. 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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