Rieter Holding (VTX:RIEN) Will Pay A Larger Dividend Than Last Year At CHF3.00

Rieter Holding AG (VTX:RIEN) has announced that it will be increasing its dividend from last year's comparable payment on the 23rd of April to CHF3.00. The payment will take the dividend yield to 2.3%, which is in line with the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Rieter Holding's stock price has increased by 45% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Rieter Holding

Rieter Holding's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, Rieter Holding's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to fall by 16.6%. If the dividend continues along recent trends, we estimate the payout ratio could be 21%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of CHF3.50 in 2014 to the most recent total annual payment of CHF3.00. The dividend has shrunk at around 1.5% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Rieter Holding has impressed us by growing EPS at 18% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Rieter Holding's prospects of growing its dividend payments in the future.

We Really Like Rieter Holding's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

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. For example, we've identified 5 warning signs for Rieter Holding (1 shouldn'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.