Kardex Holding (VTX:KARN) Is Increasing Its Dividend To CHF4.30

Kardex Holding AG's (VTX:KARN) dividend will be increasing to CHF4.30 on 27th of April. Based on the announced payment, the dividend yield for the company will be 2.1%, which is fairly typical for the industry.

See our latest analysis for Kardex Holding

Kardex Holding's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. At the time of the last dividend payment, Kardex Holding was paying out a very large proportion of what it was earning and 111% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Over the next year, EPS is forecast to expand by 12.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 73% by next year, which is in a pretty sustainable range.

Kardex Holding Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The first annual payment during the last 9 years was €0.95 in 2013, and the most recent fiscal year payment was €4.14. This means that it has been growing its distributions at 18% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Kardex Holding has seen EPS rising for the last five years, at 7.4% per annum. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Kardex Holding is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Kardex Holding you should be aware of, and 1 of them is potentially serious. Is Kardex Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.