Geberit (VTX:GEBN) Will Pay A Larger Dividend Than Last Year At CHF12.50

The board of Geberit AG (VTX:GEBN) has announced that it will be increasing its dividend on the 21st of April to CHF12.50. The announced payment will take the dividend yield to 2.3%, which is in line with the average for the industry.

Check out our latest analysis for Geberit

Geberit's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Geberit's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

EPS is set to fall by 4.4% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 64%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Geberit Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from CHF6.30 to CHF12.50. This means that it has been growing its distributions at 7.1% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Geberit Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Geberit has grown earnings per share at 7.6% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Geberit Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Geberit is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Geberit that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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