DKSH Holding's (VTX:DKSH) Upcoming Dividend Will Be Larger Than Last Year's

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 makes the dividend yield 2.7%, which is above the industry average.

View 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. Prior to this announcement, DKSH Holding's dividend was comfortably covered by both cash flow and earnings. 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 4.3%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 68%, which is comfortable for the company to continue in the future.

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 implies that the company grew its distributions at a yearly rate of about 12% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

DKSH Holding May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately, DKSH Holding's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 1.5% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

We Really Like DKSH Holding's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 3 DKSH Holding analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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.