The board of Interroll Holding AG (VTX:INRN) has announced that it will be increasing its dividend on the 19th of May to CHF31.00. Despite this raise, the dividend yield of 1.0% is only a modest boost to shareholder returns.
See our latest analysis for Interroll Holding
Interroll Holding's Payment Has Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end. Interroll Holding is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
The next year is set to see EPS grow by 5.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.
Interroll Holding Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was CHF7.00 in 2012, and the most recent fiscal year payment was CHF31.00. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. 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
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Interroll Holding has grown earnings per share at 18% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Interroll Holding 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.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Interroll Holding (1 can't be ignored!) that you should be aware of before investing. 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.
About SWX:INRN
Interroll Holding
Provides material handling solutions in Germany, rest of Europe, the Middle East, Africa, the United States, rest of the Americas, China, and rest of the Asia- Pacific.
Flawless balance sheet, good value and pays a dividend.
