DKSH Holding (VTX:DKSH) Has Announced That It Will Be Increasing Its Dividend To CHF2.05

The board of DKSH Holding AG (VTX:DKSH) has announced that it will be increasing its dividend on the 23rd of March to CHF2.05. This will take the dividend yield from 2.6% to 2.6%, providing a nice boost to shareholder returns.

See our latest analysis for DKSH Holding

DKSH Holding's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, DKSH Holding was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to fall by 6.1%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 69%, which we are pretty comfortable with and we think is feasible on an earnings basis.

DKSH Holding Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The first annual payment during the last 10 years was CHF0.65 in 2012, and the most recent fiscal year payment was CHF2.05. This works out to be a compound annual growth rate (CAGR) of approximately 12% 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.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. However, DKSH Holding's EPS was effectively flat over the past five years, which could stop the company from paying more every year. DKSH Holding is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

DKSH Holding Looks Like A Great Dividend Stock

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. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 5 analysts we track are forecasting for DKSH Holding for free with public analyst estimates for the company. Is DKSH Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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