Schweiter Technologies (VTX:SWTQ) Is Due To Pay A Dividend Of CHF40.00

The board of Schweiter Technologies AG (VTX:SWTQ) has announced that it will pay a dividend on the 12th of April, with investors receiving CHF40.00 per share. This means the annual payment is 3.7% of the current stock price, which is above the average for the industry.

See our latest analysis for Schweiter Technologies

Schweiter Technologies' Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Schweiter Technologies' dividend was only 68% of earnings, however it was paying out 143% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

The next year is set to see EPS grow by 4.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 65% by next year, which is in a pretty sustainable range.

Schweiter Technologies Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from CHF12.00 in 2012 to the most recent annual payment of CHF40.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

We Could See Schweiter Technologies' Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Schweiter Technologies has been growing its earnings per share at 6.9% a year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Schweiter Technologies' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Schweiter Technologies is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Schweiter Technologies 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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